Multifamily Strength Will Be Boosted by Wage Growth

Posted on November 30, 2015

IRVINE, CA—The multifamily sector’s strength comes from the fact that demand has staying power, vacancies are already low so rents are strong and growing, and so are wages,’s chief economist Peter Muoio tells After a successful RealShare Apartments conference in October, we spoke exclusively with Muoio about the multifamily sector, what’s driving it nationally and the trends he is noticing in this product category. What are the most interesting trends you’re noticing in the multifamily sector nationally?

Muoio: Multifamily really is the engine that can. The degree to which it just keeps chugging along is amazing. Rents are strong and have been growing and accelerating steadily. We’re beginning to see wage growth, which is helping to relieve the limits on landlord rental increases in the face of stagnant income. What is the relationship between the multifamily and single-family markets with regard to development?

Muoio: In terms of development, multifamily development is generated by low vacancies and strong rents. It’s not something that’s really tied to single family except as they compete with each other as a place for people to live. But right now, given the demographics, the cards are stacked in favor of multifamily. It doesn’t have to do with single-family builds at all. What macro factors do you anticipate will affect the multifamily market in 2016 and beyond?

Muoio: The single biggest new thing we think will have a positive impact on the multifamily market is the emergence of stronger wage growth. The sector has had a lot of demand because of people shifting from owning to renting, and household formation is increasing—young people who were living at home with their parents are now going out and renting apartments. This piece of the puzzle is kicking in: people are in better economic shape and landlords are finally able to pass rent increases. This is enabling rents to increase strongly. How will the investor profile for this sector continue to change?

Muoio: I don’t see a major shift in terms of the type of buyer for apartments. It will continue to be a very attractive property segment across property types because of the continued strength it is demonstrating and will continue to demonstrate.