Historically low and favorable conditions are expected to continue.
Single family residential (SFR) starts were 17% below one year earlier in the six-month phase ending March 2019. Multi-family construction starts were down 7% from a year earlier.
Multi-family construction remained steady in 2018, with year-end totals the same as the prior year. Demand for multi-family rentals has generally been higher during this residential construction recovery compared to new SFRs. However, buyer-occupant demand for SFRs is gradually increasing as jobs are recovered.
SFR construction starts continued to rise in 2018, turning in a 9% increase over 2017. While positive, this rate of increase was down from the previous year, which saw a 17% rise. Expect SFR construction to continue to slow through much of 2019, the result of rising mortgage rates, slowing sales volume and decreasing home prices. Further, compared to the 150,000 SFR starts achieved in 2005 at the height of the boom, even 2018’s positive performance – resulting in 62,600 SFR starts – is a fraction of what is needed to meet demand.
Like SFR construction, multi-family starts amount to just a small amount of what is needed to keep up with rising demand from California’s growing population. State-initiated legislative efforts to add to the low- and mid-tier housing stock have focused on encouraging more multi-family construction. Therefore, the slowing in multi-family construction will not be as steep as that experienced for SFR starts, even as home sales continue to slow across California.
RENTCafe’s Adrian Rosenberg said, “Located in East Vallejo, ZIP code 94591 is the 4th largest Baby-Boomer hot-spot in the Bay Area. More than 80 percent of its residents live in single-family homes, in one of the most affordable sub-markets in metro San Francisco. Close to shopping and entertainment, the area has a 21 percent share of Baby Boomers, down by 11 percent over the last five years, when 23 percent of its residents (some 12,300) were Boomers.”
We believe we are well positioned to achieve organic growth through a combination or rent increases driven by strong market fundamentals, increasing operational efficiencies, and capital expenditure. We continue to identify and implement new opportunities and ideas to drive revenue in the near and long term by applying new and proven approaches of multifamily rental providers. We also see new opportunities to expand margins by centralizing administrative support and professional expertise. The teams of CPA’s, contractor’s, and attorney’s that we have employed and partner continue to optimize our platform. In addition, we intend to capitalize on highly fragmented markets by utilizing our unique acquisition capability and flexible balance sheet to make attractive investments.
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