31 Aug What A Recession Could Mean for Multifamily
It doesn’t matter how we define it; a recession is officially here. And the big question is how will it affect multifamily?
In this article, we will answer this question while offering insight into how the recession will affect multifamily for the remainder of 2022 and beyond.
A Balance of Supply and Demand?
One of the first things that most economic analysts agree on is that recession will bring a ‘balance’ between multifamily supply, and demand, in the United States.
Even though having a balance between supply and demand is good, the reality is that the single-family housing market could disrupt that balance, as more people are choosing to rent instead of buy properties, as the traditional single-family home is out of reach for most buyers.
One positive thing about the 2022 recession is that home prices are trending downward nationwide.
With single-family home prices starting to fall, it’s unlikely that we will see a major disruption of multifamily supply because many of the single-family home buyers who have been sitting out the real estate market in recent years may return to take advantage of low-priced homes.
Low Unemployment and Tight Labor Market
Another economic condition that will benefit the multifamily market is low unemployment and a tight labor market.
With jobs easier to come by than they were a few years ago, more renters than ever before can earn income to pay their rent.
Even though the labor market is strong right now, the cost of living is also rising nationwide, especially in the LA area, where renters often must work multiple jobs, or have roommates, to afford Los Angeles area rents.
If we have a long-term economic recession, combined with inflation, this could disrupt the labor market, and many renters face economic hardship, especially as most renters in the 2020s has less money saved than the average renter did 10 years ago.
Ultimately, it’s possible that we may see a slight vacancy rate increase combined with a deceleration of rent growth in the next 12-24 months, but a prolonged ‘freefall’ isn’t expected because this recession is different than what we experienced in 2008.
Contact MW Real Estate Group
At MW Real Estate Group, we specialize in managing multifamily rental properties for the Los Angeles area.
To learn more about the property management services we can offer you, contact us today by calling (213) 927-2117 or click here to connect with us online.