Multifamily sector suffers, but recovery ahead.


ACCORDING TO AN ARTICLE BY STANDARD & Poor's (S&P), New York, "Performance Declines in U.S. Multifamily Sector, Demographics and Improving Economy to Fuel Recovery," the multifamily real estate sector--while considered extremely stable--has not been immune to the effects of the anemic economic recovery and the historically low-interest-rate environment, and is currently experiencing a decline in financial performance.

However, within the next five years Standard & Poor's expects the demand for multifamily housing to increase, fueled in large part by demographic forces consisting of baby boomers and echo boomers (25- to 29-year-olds) seeking apartment rentals as well as an improving economy, which should strengthen the performance of the multifamily sector.

"Currently, the multifamily sector is experiencing higher vacancy and reduced rents," said Joan Biro, a director in Standard & Poor's Real Estate Finance group, and co-author of the article, "The experience so far this cycle is for weakness at the high [class A] and low [affordable] ends of the spectrum, with properties positioned in the middle [class B] so far faring best. Even with the currently higher vacancies and reduced rents, the delinquency...

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