Positive Outlook for Multifamily as Renters Migrate South

February 17, 2021

Positive Outlook for Multifamily as Renters Migrate South

February 17, 2021

As we enter the era of remote work, more Americans are moving closer to the border. According to recent analysis of homebuyer trends performed by Redfin.com, several metros across the southeast and southwest United States attracted large swathes of new residents in 2020. Attractive employment opportunities and a reprieve from cold weather are just two of the most popular reasons why so many residents are heading south.

• Phoenix, Arizona (82,601 net inflow)
• Dallas, Texas (76,037 net inflow)
• Orlando, Florida (60,977 net inflow)
• Tampa, Florida (47,000 net inflow)
• Austin, Texas (46,958 net inflow)

These trends are likely to hold steady in 2021. Even as vaccination efforts ramp up and the country returns to normal, employees have gained significant flexibility in terms of choosing where they work. Many expect this to become the norm, and this means major opportunities for multifamily development in these metros over the next ten months.

Here is a detailed look at why the country’s top five metros for relocating Americans are also ideal markets for multifamily investors to keep on their radar for the remainder of the year.

Established White-Collar Job Hubs

A major factor driving the high number of net population inflow into these five metros is the presence of nationally recognizable major employers. Amazon and Deloitte continue to expand in Phoenix, for example, and indoor cycling company Peloton announced plans to expand its headcount in Dallas by 1,600 new jobs this year.

Additionally, many of these metros have seen a large share of their white-collar workforce return to their jobs thanks to most companies rapidly adopting flexible remote policies. On average, white-collar jobs make up close to 64% of employers across the top five inflow metros. This rapid pace of economic recovery in the white-collar sector has helped these metros remain highly attractive to young professional renters, a key renter demographic.

Cranes dot the Phoenix metro skyline; over 14,000 new apartment units are scheduled to come online in 2021.

Growing College-Educated Populations

Not surprisingly, the much of the positive net population inflow into these metros has been driven by recent college graduates searching for jobs. According to data collected by the American Community Survey, the number of residents in the top five inflow markets with a bachelor’s degree or better increased annually by over 5%.

This trend may not have held true through 2020 due to the outsized impact of the pandemic on universities nationwide. That said, it still speaks to the rate at which highly qualified professionals have flocked to these major metros in recent months.

Rapidly Climbing Home Prices (and Shrinking Supply)

New residents arriving to the top five inflow markets nationwide will find themselves facing limited options for purchasing a home. One factor is cost. Home prices continue to skyrocket across the country. This is especially true in metros like Phoenix, which have seen a mighty influx of affluent home buyers from other states seeking relative affordability.

As a result, metros like Phoenix, Dallas, and Austin are seeing home prices rise annually by close to 20%. Home prices are not rising as aggressively in Tampa and Orlando but are still increasing close to 10% each year.

Compounding the supply-and-demand problem is the shrinking number of homes available to purchase in these metros. According to the initially cited Redfin.com analysis, the number of homes for sale shrank in 2020 by over 15% in Phoenix, Orlando, and Austin. The total stock of homes for sale shrank by over 30% in Dallas and Tampa over the same period. These are incredibly staunch barriers from entry into the housing market for most, increasing the value and demand for rental housing in each metro.

Projected Increase in Multifamily Deliveries

Apartment developers have already taken note of the economic development drawing renters nationwide to these metros.

This is evident in the surge of new apartment development that is expected to play out in these metros through the rest of 2021. According to data collected from the Berkadia’s 2021 Forecast report, apartment deliveries in each of the five metros is expected to ramp up this year compared to 2020.

Phoenix accounted for the largest increase in scheduled new supply. Over 14,000 apartment units are expected to come online in the metro this year, up 50% from deliveries the previous year. Orlando is also expected to see a notable surge of new supply this year. Developers are forecast to add over 10,000 new units to the market to account for new demand, up 35% from new supply in 2020.