U.S. Housing’s Shifting Supply-versus-Demand Dynamics
The dynamics of supply-versus-demand economics have been an actively unfolding story in recent years across the U.S. A housing shortage rooted in the Great Recession of 2007-2009 is a major factor in the single-family and multifamily rental sectors. Still, developer activity – especially in the multifamily space – has produced a deluge of new deliveries in recent years.
Vacancies were on the rise, yet the wave of new developments is dramatically receding. The latest headlines capture the shifting story:
- “National multifamily vacancy rate may have finally peaked” (CoStar, 11/12/24)
- “Sun Belt dominates ULI’s annual ranking of most promising real estate markets” (CoStar. 10/29/24)
- “Multifamily market sees strongest demand since 2021, lowering national vacancy rate” (CoStar, 10/24/24)
- “Investor sentiment shifts back to multifamily amid broader CRE decline” (CRE Daily, 10/21/24)
- “High supply apartment markets ride demand wave” (Yield Pro, 10/17/24)
- “U.S. demographics support continued housing demand” (RealPage, 10/2/24)
- “Multifamily oversupply eases as demand outpaces construction” (CRE Daily, 9/17/24)
The glut of new multifamily deliveries is slowing. National vacancy rates seem to be plateauing if not falling in many markets across the United States. Moreover, the developers’ original expectations are being realized. The locations for this flood of construction projects had been strategically rooted in places with significant demand expectations. Massive migrations to regions such as the Sun Belt steered the development enthusiasm.
The demand was answered with a greater supply. Consequently, the supply-versus-demand balance swung briefly in the opposite direction, but the next chapter of the narrative seems to be starting now across much of the country.
Capital Square’s Response to the Latest Housing Headlines:
Capital Square continues to focus its investments on U.S. housing solutions in the form of multifamily apartments, build-for-rent (BFR) single-family homes and manufactured housing communities (MHCs). Our DST platform focuses on all three housing solutions, while our development initiatives and partnerships focus on multifamily and BFR. Capital Square Housing Trust acquires and manages a blend of housing solutions in growth markets to mitigate risks while providing long-term capital appreciation for our stakeholders.
The need for housing is real. Multifamily and single-family real estate is an essential in countless people’s lives. Ongoing demand is helping to absorb the oversupply that hit the market amid a complicated high-inflation, high-interest-rate environment.
Consequently, at Capital Square, we believe the future is looking bright – for real estate, for our investors and for our firm as a whole.
Learn more about our open offerings.
Disclosure: Disclosure: Securities offered through WealthForge Securities, LLC, Member FINRA/SIPC. Capital Square and WealthForge Securities, LLC are separate entities. There are material risks associated with investing in DST properties and real estate securities including illiquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, returns and appreciation are not guaranteed. IRC Section 1031 is a complex tax concept; consult your legal or tax professional regarding the specifics of your particular situation. This is not a solicitation or an offer to see any securities. Please read the Private Placement Memorandum (PPM) in its entirety, paying careful attention to the risk section prior to investing. Diversification does not guarantee profits or protect against losses. Private placements are speculative.
