Multi-family sector is hot for investors
One of the reasons for the high yields, according to the report, has been an influx of new residents settling in certain areas. The Phoenix market, for example, saw the biggest increase in household migration nationwide in 2020, according to the report. The city also held the top spot in terms of total migration with the California Inland Empire, which benefited from an influx of residents moving east from Los Angeles to Riverside.
At the same time, the cap rate squeeze was most severe in Phoenix; Tampa, Florida; and Charlotte, North Carolina. All three markets were more than 100 basis points lower from the previous three-month period.
âWe affectionately call them the solar belt market,â she said of the most notable investment bright spots. âThese would be the South and Southwest markets. By name, some of the ones that work the best – and should continue to do so – are Phoenix and the Florida subways like Tampa and Fort Lauderdale in South Florida. Also, we see Riverside-San Bernardino. So really, the southern part of the United States is doing exceptionally well. “
Another factor attributable to the explosive growth of multi-family is that many are excluded from the housing market against a backdrop of steadily rising home values, Rasmussen said.
“My God, the prices of these homes are skyrocketing,” she said. âIt’s just mind-blowing. People have to live somewhere. Even though a lot of people want to enter the single family home market, they are simply excluded from it. Especially the Millennials who have been overpriced for a long time.