This year has certainly held it’s challenges but the question now presents itself, ‘ what will 2021 look like? At this point we can clearly see that 2020 will transition into the coming year but how it will transition into the new year for the multifamily industry holds its predictions. Let’s look at some highlights that may give us insight into the 2021 forecast for multifamily properties.
Increase In Delinquency Rates
Delinquency rates tend to be mixed since they vary according to property type and capital sources but according to the Mortgage Bankers Associations latest delinquency report, multifamily mortgage delinquencies are still increasing, though at a much slower rate compared to earlier in the year around April and May. When the first wave of the pandemic arrived, many were at loss of work which affected rent stability and thus multi property owners being able to take care of their end. Luckily, financial relief was offered through a variety of programs which allowed those affected by job loss to have the ability to pay rent or push their rent out for a period of time. Looking ahead into 2021, if businesses can reopen and begin to recover their losses, multifamily delinquency rates should decrease before the years end. Of course, much of this will be dependent on Covid case numbers but if a vaccination truly puts a halt on the spread of the virus then 2021 should be looking upward.
Multifamily Properties Vs. Home Ownership
If 2020 has taught us one thing, it’s taught us that not everything is in our control. The fact that a widespread virus can wreck such havoc on the economy; threatening the livelihood of the everyday person could have some rethinking their living situations. At some point, financial relief programs will no longer be something that people can rely on, which could cause people to look into other options as job security is not a given. Even those who have jobs that are deemed essential may begin to rethink their financial situations and where they live in congruence to that. Depending on your location, multifamily property rental rates can be on the higher scale but they almost never compare to those of mortgage rates. Those who are at risk of losing their homes or simply just want to downsize due to budget, may be driven into looking at multifamily properties as a new way of living. Other factors include those looking to relocate which almost always means they will rent from multifamily units first as they get settled in a new area. These factors are certainly projecting that multifamily properties will peak for 2021 as the likelihood of families choosing multifamily units is favorable.
Though we witnessed a halt in all realms of construction at the beginning of the pandemic, over time this began to ease back into its normal swing with production being the only thing that was causing things to slow. It’s true that 2021 may still see some barriers when it comes to companies getting the products they need but nowhere near what it was at the beginning of the year. The demand for multifamily units is high. According to the National Apartment Association almost 330,000 new multifamily units will be needed annually through 2030 making construction essential for the future. How many of these units are actually added annually will come down to how easy it is to access materials but with China progressing against the virus compared to the States, manufacturing and distribution should speed up.
A New Look For Multifamily Properties
With multifamily properties looking at high demand, new units will need to be constructed but with this new construction will come a new vision in how multifamily properties function. For 2020 we had to figure out new ways of doing life with everything from social distancing to sanitation and wearing masks. Looking ahead into 2021, multifamily properties can use what they learned from the previous year and create models that support this new style of living. As much as some would like to go back to how things were before Covid, the analytics suggest that will not be the case even once the numbers on Covid cases have subsided. However, this doesn’t have to be looked at as a negative. Expanding the space in common areas, extra square footage in individual apartments and how a property can adequately be managed will all need to be considered with new construction. Tenants are looking for ample amounts of space to both live within their walls and out in everyday life. Providing a place where people can be safe but still feel free to go about their daily lives is essential during this time period and will certainly be an attractant for those looking to rent multifamily units.
The 2021 forecast for multifamily properties doesn’t look grim. It may take some time to recover from various losses that were experienced but knowing everything that 2020 brought to the table, it’s amazing that the future is already revealing positives.