News & Insights

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The growing U.S. population and a decreasing average household size puts pressure on housing demand

Demand for housing is best quantified by the formation of new households. A household is defined as one or more people living in an individual dwelling unit, such as a family living in a home together, roommates sharing a rental unit, or an individual living alone. Household formation occurs when an individual or a group of individuals move from one household into a separate household, such as when a young adult moves out of their parents’ home to live alone, or with a roommate or partner, or when an immigrant (either an individual or family unit) moves into the country. These new households, by definition, need to move into a separate housing unit.

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Understanding the chronic housing shortage in the U.S., the impact on the working middle class, and the opportunity for investors

The US housing market is chronically undersupplied. This is a direct result of a long-term, secular trend that began after the 2008/2009 Global Financial Crisis (the “GFC”) and has worsened each subsequent year. Prior to the GFC’s end, the US had a peak estimated housing surplus of 2.9 million units. However, after the GFC ended and its effects on the residential construction sector became fixed within the economy, this surplus declined every year until housing demand surpassed supply in 2017, when a shortfall of 731,000 units materialized, according to Kingbird analysis of Federal Reserve Board of St. Louis, US Census Bureau, ACS IPUMS, and CoStar data. This shortfall has since grown to between 3.8 and 6.8 million, as of 2020, according to Freddie Mac Housing Supply: A Growing Deficit May 2021 and National Association of Realtors Housing is Critical Infrastructure: Social and Economic Benefits of Building More Housing June 2021.

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Don’t let doom and gloom headlines distract from your investment strategy

Amidst rising interest rates, high inflation, and broader economic uncertainty – there is no shortage of doom and gloom headlines when it comes to CRE investment. Recent apartment vacancies piling up in certain geographies and sectors of the multifamily market have created a shift in media sentiment and headlines that multifamily has been immune to over the last few years. As headlines continue to simplify the narrative, our research continues to illustrate that the underlying demographic fundamentals and demand drivers remain compelling. Multifamily and related rental housing investment is a long game – and it’s critical to stay focused on the structural and secular factors that form the basis for a durable long-term investment program in the sector.

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GlobeSt.com: Multifamily Investment’s Bright Spots for 2023

Rising interest rates, a potential policy-induced recession, credit terms, and valuation uncertainties are all a reality, but the current “doom and gloom” headlines oversimplify and obscure the long-term positive fundamentals of the multifamily asset class specifically. Ken Munkacy talked to GlobeSt about Kingbird’s research and analysis that shows the underlying fundamentals in the multifamily asset class – especially workforce housing – remain solid, and investing in distress as 2023 unfolds presents an opportunity to capture strong risk-adjusted returns.

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GlobeSt.com: Global Direct CRE Investment Falls for First Time Since the Pandemic

Global direct investment in real estate fell for the first time on a quarterly, annual basis since the onset of the pandemic, according to a report this week from JLL. Vince DiSalvo spoke to GlobeSt about how real estate values, like valuations across all asset classes, will continue to be put into question as the Fed determines its policy guidance going forward. While investors are wise to remain cautious, Vince acknowledges real estate is special because it is both a cash flow series and a hard asset.

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