Limited real estate supply vs decreasing demand

[Jonathan Bombaci]

We are still struggling with record low inventory here in MA and NH. Last year was a crazy high sellers market due to lack of supply, especially in the Multi-family space, and this year had even less inventory hitting the market. Buyer Demand is still high, especially in the MF space but it is starting to get big bites taken out of it. As rates go up it’s reducing the amount of people ready, willing, and able to buy. We’re also seeing banks tighten credit requirements which is knocking out some buyers as well. I don’t know when we’ll hit the equilibrium as in continued lack of supply is offset by reduced demand but we’re not there yet. 

On the Multifamily side rents are increasing at an alarming rate. We just saw 2023 section 8 rents go up 15-20% year over year in some of our target markets like Gardner and Fitchburg as well as southern NH.

I don’t know what the market is going to do but historically inflation is a friend to real estate owners. Rates are already starting to knock deals out of the market for us and terms have gotten pretty bad with lenders.  If this continues we’ll be buyers on less and less properties but for now make hay while the sun is still shining and then be prepared to hold. At least that’s our strategy. 

What are you seeing and planning for?