Sunny prospects for the Sun Belt States

The multifamily housing market in the USA is generally very attractive for investors. According to Jones Lang LaSalle, the transaction volume for multi-family housing has risen steadily over the past few years, to $138 billion in 2020, and the trend is continuing upward.

One of the key drivers of this growth are Millennials and Baby Boomers. Millennials are predicted to have to rent much longer than previous generations, both because housing prices continue to rise in all states and because student debt has reached a record high of $1.7 billion. dollar.

If we look at this as a percentage of household debt, we see that while mortgages have largely remained flat, student debt has increased dramatically, making it increasingly difficult to buy homes, especially in the generally more expensive Northern states.

As a result, homeownership by Millennials will remain subdued and BTR systems will continue to flourish.  Experts predict that as Millennials age, they will opt for rental housing in lower-cost cities and suburbs. Similarly, baby boomers will continue to drive growth in rental households. By 2030, all baby boomers will have reached retirement age and will want to cut back on their financial obligations in exchange for more disposable income.

Multifamily housing in Sun Belt states is particularly well-suited to benefit from the above factors. The Sun Belt States are becoming increasingly attractive to “White Collar Workers”, especially in the back-office and technical professions. 17 Sun Belt cities rank among the top 50 cities for technical talent, offer a lower cost of living and a pleasant climate all year round. This results in disproportionately high immigration and population growth in these states.

Engel & Völkers even speaks of an “end of the metropolises”. New York City, Los Angeles and San Francisco are expensive places. “More and more Americans are turning their backs on the big cities and settling in smaller towns,” predicts the brokerage house. One of the clear winners is Florida. There prices for housing are relatively low, furthermore, the state is one of the few, in which no income tax is due. A mild climate and a variety of recreational opportunities round-up the overall package of location advantages for many Americans.

Yardi Research expects rent increases of 2.4 percent for the high-growth southern states. This applies in particular to the metropolitan regions in the states of Texas, Georgia, North Carolina and Florida. Cities such as Austin, Atlanta, Raleigh, Charlotte and Tampa are even expected to achieve 2.7 to 3.9 percent. These prospects are already prompting the first investors and project developers to act. According to Yardi, an overall increase in completions of 15.3 percent is expected for 2021. Dallas, Miami, Houston and Austin in particular are expected to see increased completion numbers.

Core real estate numbers also continue to trend positively for the Sun Belt states. Looking at overall investment growth, we find that of the 10 fastest-growing cities, 8 are from Sun Belt. In terms of multifamily investment, the number increases to 9 out of 10 cities.