Sunday, December 16, 2012

Multi-Family Bubble Pop - Here's how it'll happen:

Here's the thing every multi-family analysis I've read skips or ignores:
We're in a period of unusually low occupancy of regular single family homes.
The vacancy rate is unusually high for those homes.

A small shift in that occupancy will have 2x as big an effect on multi-family vacancy (there are 2x more families typically living in houses than apartments in the US).

If/when there is a bubble popping in multi-family it won't be the increase in units from new building that causes the bubble-pop (by itself).
But all those new units combined with so many fewer renters once houses start selling again and all the people who normally would've bought already can buy again.

It only takes a small shift to go from shortage to glut in the apartment biz, and it can happen fast because there's a new set of renters every month who don't care what the rents were the month before.  

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