We previously examined the multifamily segment and selected 10 hot markets for investors. The sector is still benefitting from long-term expansion, with positive job growth expected in most of the nation’s major metros over the next couple of years, according to Fannie Mae’s Multifamily Market Commentary for June 2017. New supply is a concern for multifamily properties, but even that is expected to moderate as only 12 metro areas have more than 20,000 units that have been completed or underway since 2016.
The great outlook is not uniform across all multifamily markets, however. Employment rates in some areas have yet to fully recover to their pre-recession levels. Even in an environment with robust demand, certain smaller segments are bound to disappoint.
The letdown is affecting even highly desirable markets, including Los Angeles and New York City. Why? Rents have skyrocketed to the point where they are becoming unaffordable. Also, rent control laws like the ones in Los Angeles are beginning to make investors hesitate about making new forays into an otherwise strong sector.
This roundup takes a look at markets that have a ways to go before they become investor favorites, and ones that are already so desirable that they leave limited upside potential.