The multifamily market has seen phenomenal growth in rents and property values for several years. Can the good times continue to roll in 2017? We think they can, though the rate of rent increases is going to slow down, transaction yields have likely bottomed and oversupply is going to negatively impact some markets. However, we expect that the multifamily market will continue to enjoy positive fundamentals. The biggest factor is that demand for multifamily is poised to remain robust for years, maybe as much as a decade. The number of Millennials between the prime renter ages of 20 and 34 is projected to increase by two million before it peaks at almost 70 million in 2024. That coincides with a bump in the number of white, college-educated renters relocating to urban areas for the “18-hour” city lifestyle that includes entertainment and access to public transportation. As the young worker pool grows, unemployment rates have dipped below 5 percent and wage growth has intensified, hitting 2.8 percent year-over-year as of October 2016. The result is a boom in household formations, which have steadily risen since slumping badly in the wake of the last recession. A further reason for optimism is that new supply has not kept up with the surge in multifamily households. The number of renter households increased by 9.3 million in the 10 years between 2005 and 2015, according to the Census Bureau, while the number of owner-occupied households dropped by 2.1 million. The result is that occupancies of stabilized properties are near all-time highs, at 95.8 percent nationally as of October, according to Yardi Matrix. Even though supply has rebounded from the recessionary lows­—Yardi Matrix forecasts about 350,000 units to come online in the U.S. in 2017—that is barely enough to match...

NAAHQ reports that apartment revenues in the nation’s top 100 largest metros currently exceed pre-recession levels by nearly 14 percent, with considerations for rising rents and the recovery in occupancy. While the usual top performers remain strong, suburban markets are showing a healthy recovery and bright future. Middle-markets are giving their high-end counterparts stiff competition. While individual urban locations can boast the highest new construction rates, many cities’ suburbs combine to exceed the growth of urban cores. Suburban middle-market communities, which are the vast majority of apartment inventory, and new luxury apartment communities present appealing options for a growing number of renters, particularly young singles and families. The strength of middle market performance is projected to continue well into 2015 since the factors contributing to their success are unlikely to change. Metropolitan zip codes are still desirable to many but high rents have driven a large pool of renters to the more moderate prices of the suburbs. Secondly, homeownership isn’t a viable option for most of these renters, whose incomes do not support the rising interest rates, utilities, and maintenance costs of a single-family property. Lastly, vacancy rates are low for middle-market and top-tier communities in the suburbs, resulting in less horizontal movement for renters. With occupancy at 95.8 percent, owners can receive top-dollar rents for available units with very little room for competitive pricing within comparable properties. But not all suburbs are flourishing equally. Renters who seek middle-market properties abandon the city limits with a few trade-offs in mind: Proximity to Universities Students and young singles provide a boost to many college towns, which are some of America’s fastest growing cities. Access to Public Transit Public transportation that connects suburbs to the major cities will reap the benefits of greater growth. Such conveniences...