Atlanta Area Multifamily Housing Construction
The Federal Reserve Bank of Atlanta (FRBA) analyses Atlanta area multifamily housing construction in a report dated August 27, 2015. “Looking around Midtown Atlanta, it is easy to wonder if multifamily housing construction is getting ahead of itself.” Is Atlanta overbuilt? “According to the Midtown Alliance, within just a 0.5-square-mile portion of Midtown Atlanta, 981 units have been recently delivered, 3,392 units are under construction and 4,732 are in various stages of planning. Dodge Pipeline reports that the entire Midtown/Five Points submarket has 4,865 units under way. For reference, peak activity in the Midtown/Five Points area from 2003 to 2007 was 4,636 units under construction with a total of 10,831 units completed.
The FRBA looked at Yield spreads—the capitalization rate on recent apartment transactions serves as one indicator of optimism in a market. A narrow spread is associated with “frothiness.” Apartment yield spreads in the second quarter of 2015 are in line with 2003–04 levels. So by this measure, they conclude apartment activity does not appear too frothy on a nationwide market basis or in Atlanta.
As far as demand for apartments, the FRBA determines that there has been a lot of multifamily construction, “…this activity is not necessarily unjustified. Demographics point to greater demand for rental property…” and increased supply has not resulted in increasing vacancy rates and rent growth has held steady, also in Atlanta.
Bottom Line: The FRBA sees frothiness, but demand is key. Demand bears watching.
Houses in most places in the U.S. are still below their price peaks of 2007-2009. Why is there so much demand for renting and not more demand for single family housing?
Why would you rent instead of buy?
- Flexibility – if you don’t know how long you will stay in a particular area, renting works well
- Career stability – many young people seem to change jobs frequently, renting works well
- Credit – is either poor or not well established. (The good news here for renters is that on time rental payments can establish credit.)
- Income instability – It is hard to make a long term commitment on a house when you have worries about a stable income
- No maintenance expenses – when something breaks, you just call the landlord. Maintenance can add significantly to the cost of home ownership.
- No down payment – sure you may have first and last monthly rent due when you move in plus a security deposit, however it’s nothing compared to 3% to 20% down payment required when you buy a house.
- You may be closer to work in an apartment than from a house you can afford.
- Amenities – many apartment complexes offer a pool, gym, meeting and rec rooms. Like college dorms for adults and you are surrounded by other people your age.
- Fear – they are afraid of another housing collapse that would hurt them financially.
- In Renter’s Purgatory – many renters are trapped between rising rents, a large percentage of income going toward rent, and inability to save for 3% to 20% down payment. Many also have student loans.
Val Buys Houses LLC is a member of the community in Cobb County and Atlanta and we specialize in helping homeowners out of just about any situation, no matter what! There are no fees, upfront costs, commissions, or anything else. Just the simple honest truth about your home, we buy cash, therefore we can help you sell it fast to resolve any situation, or give you as much time as you need.
Give us a call today at 404-844-8845 and let us see if we can help YOU!