The demand for a home in this pandemic has been a hot topic in the market. With some financial assistance and a push for lifestyle changes, renters and homeowners reviewed their current way of living, and many f them agreed that a change was very much needed. The result of this was an increase in both sales and rent prices.

We need to understand how the “for-rent” market is performing given the unprecedented backdrop of the supply chain. The economic environment has become more challenging and This is thanks to the reduction of traditional barriers to the cross-border movement of products, services, capital, people, and information.

The market as we know it today can be categorized in one phrase and is “NO AVAILABILITY”. The market has the lowest number of vacant units available on record. The renewal rate is the highest in history with a 58.3% as in the first year of the pandemic it was a 57.4% of renewal which leads us to the conclusion that there is no flow with the apartments in rental, which also means that persons and families that are looking for a new place don´t find something that they like.

In many markets across the country today, rents are increasing to the tune of 1% to 3% per month. Those looking for a place to settle are feeling the rush to lock now, fearing that rents will only keep going higher. One of the reasons why these numbers are getting higher and higher is because of the job losses, if job numbers go negative, you can see multifamily development slow as some developers pull back, jobs are the key to keeping track because they interfere with the demand.

For the discussion of renting vs own mortgage rates play a huge role in the Frost year of the pandemic when interest rates were sub-3%, and the time it took for it to pay off to own versus rent dropped to just three to four years. This got to six years when mortgage rates touched 4%, and, in today’s market, it is better to rent if you are going to stay somewhere for less than nine years.

In short, the rental market has benefited from higher mortgage rates because rents haven’t gone up as fast as mortgage monthly payments have increased.  On the for-sale side, we can see signs that show risings in the  mortgage rates and this is having an impact on the demand

The numbers in the Multifamily industry are increasing by $52.7 billion dollars experiencing considerable strength and anticipating continued demand according to CBRE Research´s late U.S Multifamily Figures report.

While capital continues to flow from both domestic and foreign sources, the targets seem to be shifting. Investors find strong non-coastal markets more acceptable than ever and there is also a growing trend toward favoring ESG-compliant assets, especially from European investors.

The investment strategy relies on seeking between risk and reward. Something to have in mind is that Class A assets in urban areas represent a huge amount of opportunities because of the pandemic-led have the most favorable Outlook in the near and médium term.

Demand also is outpacing supply in most major markets. Over the past year, the major Florida metro áreas added 34,200 units with net absorption of 50,500 units. The south área of the country delivered 51,400 units with net absorption at 60,400 units.

The multifamily sector accounted for 36.6% of total commercial real estate volume in the first half of the year, followed by industrial at 20.6% and office at 18.9%.

Trends to watch

Single-family rentals are rising

The single-family rental market will gain traction with both renters and investors as more millennials reach child-rearing life stages. Urban apartment operators will rely more on Gen Z to backfill the resulting vacancies.

Return to the office will make de demand in the urban zone will go up

Rising office occupancy will boost urban multifamily demand. The estimate is that workers will spend an average of 3.4 days per week in the office going forward. While living near the office may not be as important in the future, it will remain a key consideration for many renters and building owners.

In the multifamily sector is not news that the cost of insurance is rising. “Last year, pricing increased by 20% to 40% instead of the typical 10% to 15% increase we would typically see,” Jeremy Burr the vice president of sales at Insurance Office of America says.

There are a lot of factors influencing this increase in the prices, the first one is the natural disasters because these events are happening even more often than before causing more and more damage in the recent years. These have caused significant losses for insurers.
“Insurers generally have lost money in six of the last 10 years, in part due to climate change, social inflation, unprecedented large jury awards, and inadequate pricing,” says Stephen Gaitley, senior vice president and real estate practice leader for Woodruff-Sawyer.
The second factor in this topic is inflation because of the rising costs of building materials, such as lumber, steel, fuel, and other supplies. Supply chain pressures and bottlenecks continue to drive up inflation costs. What we’re seeing is the added challenge of not knowing when materials will turn up at the site.

Al lof these costs ultimately get pushed onto the insurance company in the case of a claim, so as claim payments increase, the insurance companies need to increase rates commensurately. Most substantial increases will be felt by those builders with large fleets, high commercial umbrella limits, wind-prone geographies, and those with unfavorable claim history.

Here we help you how to minimize costs

First of all, the best way to reduce risk is to maintain properties the best you can as the property owner, for example, keeping the fire hazards, taking care of the damages rain can make, and other simple steps this will make insurance companies note that the property is well-maintained and might lower premiums because of it.

The best strategy for suppressing increases is to take ownership of your risk management plan, if you make a priority on safety, loss control, and claims management can organically reduce the frequency of damage, making it more attractive to insurance companies.
Improving tenant safety and security is another way to mitigate these rising costs this could mean installing security cameras or if you own an old building that doesn’t have fire sprinklers, adding those sprinklers can drastically reduce premiums. It might be an additional cost on the building initially, but it could ultimately mean paying less for insurance.