WHY NOW IS A GOOD TIME TO INVEST IN APARTMENT COMPLEXES

Many people are sitting on the sidelines right now, not purchasing properties because of the increase in interest rates. However, in the current real estate market, investing in apartment complexes offers a compelling opportunity, especially considering the ongoing challenges in the single-family housing sector. Recent data reveals significant barriers that prospective homebuyers face, underpinning the strategic value of investing in multifamily properties.

1. Rising Difficulty in Home Purchasing: The real estate market in 2024 continues to be tough for potential homebuyers, with persistently high prices and low inventory levels. A report from NerdWallet highlighted that less than a quarter of Americans who started 2023 intending to buy a home were successful by the end of the year, reflecting a steep decline from previous years. Moreover, high mortgage rates have significantly reduced buying power, with rates hovering around 7% as of late 2023, a sharp rise from previous years. https://www.nerdwallet.com/article/mortgages/2024-home-buyer-report
2. Decline in Home Affordability: The affordability of homes has worsened, with the National Association of Realtors (NAR) reporting a median home price of $393,500 in early 2024. This price escalation is paired with an inventory shortage that prolongs the selling process, creating a less conducive environment for buyers. https://www.nar.realtor/research-and-statistics
3. Increased Demand for Rental Properties: As buying homes becomes less feasible for many, the demand for rental properties is expected to rise. This shift makes apartment complexes a more attractive investment. The challenges in the home buying market are driving more people towards renting, thereby increasing the demand for rental housing. This is particularly evident among younger generations who find themselves priced out of the home buying market but still need accommodation. https://www.nerdwallet.com/article/mortgages/2024-home-buyer-report
4. Long-term Investment Benefits: Despite the current market challenges, real estate remains a resilient long-term investment. Apartment complexes, in particular, offer the advantage of consistent rental income, which can be more stable and predictable compared to the fluctuations in the single-family housing market.

Given the difficulty many Americans face in purchasing homes due to high costs and low availability, coupled with the enduring appeal of real estate as an investment, now is an opportune time to consider investing in apartment complexes. 

But what about those high interest rates? First, we need to recognize that what we currently call “high” interest rates, are actually close to the long-term averages. We have just been in an artificially low interest rate cycle for a number of years, and become accustomed to those rates. Higher rates mean prices will have to adjust a bit and that equals buying opportunities. When rates do come down, you can refinance into those rates, and now you have the best of both worlds - good price, and good rates. As the saying goes “Marry the property, date the interest rate.”

This strategy not only aligns with current market dynamics but also offers potential for stable, long-term returns as demand for rental housing continues to grow. Investors looking to capitalize on these trends should consider the potential of multifamily properties as a strategic component of their real estate portfolios.