Better late than never…

Call it the upside to the downturn in residential housing: apartment demand is back and that is profiting the multifamily sector. — Diana Olick, CNBC Realty Check

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I called this in early 2008 as the bubble was collapsing (before I started this blog otherwise I’d link to it) for a few simple reasons:

1. Prospective buyers would sit on the sidelines waiting for a lower home prices. No one want to buy a home (or anything for that matter) when the cost for that home will be cheaper tomorrow. In other words, no one wants to buy a home on the down slope of the real estate bubble. Thus, increasing demand for apartment rental space.
2. As homeowners were losing jobs, forced into a short sale, going through foreclosure, or strategically defaulting, they had to live somewhere. Thus, short term apartment life fills the void.
3. Uncertainty kills future sales, especially when your signing a 30 year mortgage that will crush your credit rating if you default; forcing prospective buyers to wait out the storm. Thus, a one to two year apartment lease is the better option.

But just because apartment demand is experiencing an upswing, it doesn’t mean demand is back nationwide or you (the real estate investor) can raise monthly rents by 10% as soon as possible.

Nor does it mean you should bid on the first foreclosure property you see just because apartment demand is up year over year and interest rates are still reasonably low. This is likely a very regional phenomena — New York City, San Francisco, DC & MD metro area, etc. — so do your due diligence before hitting the Fannie & Freddie foreclosure websites fast and furious during your lunch break.