雅虎香港財經 Has The Midwest Taken The Multifamily Investor Shine Off The Sun Belt?
Multifamily investors have made a lot of money over the past four years relying on Sun Belt states for high rent returns. People from Northern and Midwestern states moved to Florida, North and South Carolina, Texas, Las Vegas and Seattle in droves during the pandemic era.
And with Sun Belt states seeing rent growth of more than 16% even as late as the fourth quarter of 2021, multifamily properties in the region were making a lot of money for their investors. But a new report from CoStar Group shows the sands are shifting in 2023, and suddenly, certain Midwest cities look like prime multifamily investment targets.
Increasing interest rates and a lack of available bank funding have slowed multifamily construction this year, especially in the Southern U.S. Rents also are peaking after their meteoric rise in the past two years. Chad Littell, national director of U.S. capital markets analytics for CoStar, told Benzinga that investors want to be where growth is steady, and right now, that could be in the Midwest.
“Investors want to go to places that don’t boom or bust and are looking for steady growth. Yes, the Sun Belt saw 16.1% rent growth in 2021, but the Midwest also did 7.4%,” Littell said. “Since that time, mortgage rates have gone up, and a lot of the migration has slowed. Most people have already made their move. As a result, the Sun Belt is still growing but only at 1.6%. We’re forecasting Q2 this year to be zero.”
Don't miss:
How These Accredited Investors Pulled In Better Returns Than Warren Buffett
Why Warren Buffett's Investing Strategy Is More Relevant Than Ever In Today's Real Estate Market
Some of the darlings of the pandemic relocation have been hit hard this year, with rent growth in Las Vegas dropping to 61%, Atlanta to 41%, Phoenix to 42%, Denver to 54% and Seattle to 36%. Meanwhile, many cities in the Midwest are enjoying healthy rent growth, including Columbus and Cincinnati, Ohio; Peoria, Illinois; Madison, Wisconsin; Omaha, Nebraska; Kansas City, Missouri; and Grand Rapids, Michigan, according to Littell.
“Total sales are still climbing in the bigger markets, but I started noticing substantial pullbacks in all geographies. And some of these Midwest markets I found were not declining but increasing,” he said. “The Midwest went from 7.3% to 4% in annualized rent growth but hasn’t experienced anything like what has happened this year in the Sun Belt. Our forecasts still show the Midwest with a steady rent growth of 2.5% this year, which is right around what it was doing pre-COVID.”
While CoStar predicts that the Midwest will fare well and be more steady than other regions going forward, there are still trouble spots like Detroit, down 32%. Meanwhile, Littell referred to Chicago’s drop of 13% as “not that bad.”
Over the past five years, private market real estate investments have outperformed the publicly traded REIT market by about 50%. Check out Benzinga’s Real Estate Offering Screener to discover the latest passive real estate investments.
Check Out More on Real Estate from Benzinga
Don't miss real-time alerts on your stocks - join Benzinga Pro for free! Try the tool that will help you invest smarter, faster, and better.
This article Has The Midwest Taken The Multifamily Investor Shine Off The Sun Belt? originally appeared on Benzinga.com
.
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
