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REAL ESTATE Apartment building market tanks?

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Sid23

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What would the world have to look like for the apartment building market to become undesirable?

Other than sky high interest rates (which would make capital hard to obtain, however, would probably cause the number of renters to rise), what types of things does one have to be aware of?

With changing demographics, it seems that there will always be at least 1 market in the US that would make sense to invest in...

I suppose a full-out recession where people are not moving and squeezing 10 people into a unit would be a bad time...

Interested to hear people's thoughts....
 

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JScott

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If the following were to happen in every major market:

- Interest rates drop
- Housing inventory increases
- Housing prices collapse (related to above)
- Population decreases
- Incomes rise

then you would have the possibility of the apartment market collapsing.

Of course, that combination of scenarios doesn't make much sense in any realistic scenario (it would have to be really contrived).

That said, some portion of those scenarios certainly plays out in individual areas, and can/does negatively impact the apartment market in those areas.
 

SteveO

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You certainly want to hedge your bets by looking to areas that will have less impact if the economy goes into a recession. There are risks to anything. I had to hunker down during the last slowdown and did not spend as much money on the properties that needed to be spent. When the economy got better, I started spending again. Apartments were on sale during that time and I bought a bunch.
 
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Sid23

Bronze Contributor
Speedway Pass
Aug 9, 2007
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If the following were to happen in every major market:

- Interest rates drop
- Housing inventory increases
- Housing prices collapse (related to above)
- Population decreases
- Incomes rise

then you would have the possibility of the apartment market collapsing.
JScott, you are saying "all of those things" must happen for the apartment market to crash? It would take that many things?

I had to hunker down during the last slowdown and did not spend as much money on the properties that needed to be spent. When the economy got better, I started spending again.
What did the world look like during the last apartment slowdown?
 

JScott

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JScott, you are saying "all of those things" must happen for the apartment market to crash? It would take that many things?
For there to be a *crash* in the apartment market, I imagine a lot of extreme circumstances would have to conspire at the same time. Because of a number of things (less liquidity, no vacancy correlation to credit markets, more professional investors, etc), it seems unlikely that the right circumstances would occur on a national level to cause a full-fledged crash in the apartment market.

But again, there are cycles in the apartment market just like the rest of the real estate market, and you'll certainly see localized downturns that resemble (or may even be) crashes. I just don't imagine it happening on a national scale.

Now, all that said, there are others on this board that probably have much more insight and experience than I do, so I'd love to get their opinions as well...
 

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