We're in an incredible time to purchase multifamily

[Austin Wolff]

For certain markets, right now is the trough of the multifamily business cycle. 

The bubble size represents new multifamily units delivered and under construction, proportional to existing units.

The current cycle in multifamily real estate presents an opportunity, especially in oversupplied markets. See the chart below:

The cities on the right-half of the graph did not have as many proportional units under construction, and so they saw an increase in rent and a decrease in vacancy (Miami is the exception – which saw solid proportional supply growth and rent growth).

You’ll notice the markets on the left-half (starting with Dallas) are all markets that had a larger proportion of units either delivered or currently under construction (see the bubble graph above).

Without regurgitating everything mentioned in this podcast on the 18.6-year real estate cycle, I think now might be an excellent time to look for multifamily deals in oversupplied markets, as long as the underlying fundamentals of demand remain strong. (Honorable mention of Durham, NC.)

With high vacancies and lower NOI, multifamily properties should be priced accordingly (lower). And once the wave of new supply has been absorbed, vacancies should start lowering again. For certain markets, this half of the year is the dip.

Thanks to CoStar.com for providing the underlying data and publishing these graphs.