Property Management Researcher: Multi-Family Housing Not in Bubble

The multi-family sector of the real estate market has been on fire the past few years, as many Americans have been unable to afford their own homes.

The average number of multi-family units started during the 12 months through August was the most since 2006.

So, "it's appropriate to ask the obvious question: Is multi-family reaching a bubble?" Jay Parsons, director of analytics and forecasts for MPF Research, writes on Property Management Insider.

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His answer: "the data says no, but it'd be wise to watch for flashing yellow lights."

First, there's demographics. "The U.S. is seeing its highest growth rate in 20- and 30-somethings since the Baby Boom," Parsons says. "And population trends clearly show significant growth through the next decade, fueling a steady demand stream for apartments."

Meanwhile, the apartment market doesn't have to worry about the loosening of lending standards that played such a large role in last decade's housing bubble, he writes. And the multi-family building boom is still substantially smaller than that of the 1960s to 1980s.

"All that being said, we should acknowledge that the apartment market is almost certainly past the peak for this cycle," Parsons says.

Economists draw a contrast between the multi-family and single-family home sectors. "There's been a fairly compelling recovery in multi-family construction, because people need apartments to live in," Ward McCarthy, chief financial economist at Jefferies, tells Bloomberg.

"On the other hand, there's been significantly less recovery in the single-family market." Overall construction numbers "will continue to improve, but it's going to continue to be an erratic improvement," he explains.

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