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Multifamily Demand Increases in the Carolinas

The COVID-19 pandemic has certainly caused a major economic shift in many industries including the multifamily market. In April 2020 there was much uncertainty as to how the multifamily market would weather the storm of the effects of the pandemic.

Surprisingly, the impact to multifamily around the country has been minimal except for some of the lower end assets with a high resident population in travel, entertainment, leisure, or restaurant-related jobs.

Propped Up by the Stimulus Package

The stability of the multifamily market amidst the pandemic has been propped up by the stimulus packages that have been released by the government. However, one of the nice things about multifamily is the fact that housing is the second bill paid after food for residents. This is why collections are mostly at pre-COVID levels even after the stimulus package has been exhausted.  Even back in the last financial crisis of 2008 there was only about a 30-50bps drop in occupancy across the board in the multifamily market. Only 0.4% of the multifamily assets defaulted versus 4.4% on average in all other asset classes.

 “The Great Relocation”

Another side benefit to the pandemic, at least for some areas, is “the great relocation” of people moving from high population areas such as New York, New Jersey, Massachusetts, California, etc. into less dense areas and more tax favorable areas. This great relocation is creating a huge spike in the population in the Southeast including the Carolinas.

I have a long-time team member that recently moved out of South Carolina and when she put her house up for sale, she was surprised how fast it sold and the offer price. Within a 48-hour period, she had 37 tours and 12 offers with several above the asking price, all-cash, and no contingencies with an early close. She even ended up selling it for $15,000 higher than her asking price. Not bad at all.

Home Prices Increase Demand for Multifamily

When you have an increase in demand for housing, especially single-family housing, it causes home prices to increase. In 2020, housing prices have skyrocketed higher than anyone expected especially in the Carolinas.

This increase in housing causes the demand for multifamily housing to skyrocket as well. The reason is that as housing prices increase it causes multifamily residents to stay renting longer than they originally planned because the price of buying a house is higher. Also, the residential lending space has tightened up their underwriting guidelines making it harder to qualify for a home mortgage.

Shortage in Single-Family Homes

The shortage in available single-family housing has also caused an increase in demand for multifamily housing. If someone cannot find a home to live in, then they will become a resident in the multifamily housing sector to find housing.

Final Thoughts

As you can see, the demand for multifamily housing has increased dramatically in 2020 and it will only continue. In 2021 the population is projected to skyrocket due to increase pregnancies from everyone staying home for a couple of months. These babies will start being born in Q1 2020 and will be called “coronababies.” Also, there has been an increase in divorce and marriages which further increases the demand for multifamily housing.

Yes, now is a great time to invest in multifamily housing and we will continue to find you solid assets in rapidly growing markets that are stabilized by blue-chip companies.