How Bad (or Good) Can it Get?

Apartment construction brought 1.2 million new apartments to the market since 2020 and expectations are for another million units to be constructed by the end of 2025. New York, Dallas and Austin are the growth leaders. New construction is expected to slow down in 2025 as current interest rates and bank’s reluctance to lend will slow new construction starts. What does this mean? There will be new projects with lease-up concessions competing with existing apartment stock. An investor purchasing a new project needs to be very careful with rent increase projections. Rent growth is already slowing but a new project in your neighborhood can draw away residents and decrease rents until the new complex is absorbed in the market. The good news? Even with new project completions, the US remains with a housing deficit. Also, the rent battles in the Class A market may spill-over somewhat to the B and C markets, but the new construction will not have a major impact on workforce housing. Those investors buying B and C projects know very well that “they just aren’t making any more B and C apartments”.

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