Currently Eugene’s multifamily property market is healthy, bolstered by a stable economy. Vacancy for 2017 was compressed to its lowest levels at 3.6 percent, with 59 units currently available in a 12-month absorption cycle. This is wonderful news for those who want to invest in multifamily properties in Eugene. To add to this good news, the increase in interest rates means that many would-be homeowners will find it more difficult to qualify for mortgages and so will remain in the rental pool. This effect is being seen nationally as John Doherty reports in this article:
CoStar News – Higher Interest Rates Mean More Renters for Apartment Sector
The steady rise of mortgage rates presents a good-news/bad-news situation for the multifamily property sector, according to CoStar research. While any bump in interest rates increases borrowing costs for apartment developers and other commercial real estate projects, it also makes it harder for would-be homeowners to qualify for mortgages, which results in more demand for apartments.
The Impact of Interest Rates on the Multifamily Property Rental Market
Since mid-2016 the average interest rate on a 30-year, fixed rate mortgage has increased by about 1 percent, and more increases are anticipated. Although the rising interest rates impact investors as well, they also prevent many renters from becoming home buyers.
According to a report authored by Boston-based managing consultant Jeff Myers, of CoStar Portfolio Strategy:
Assuming that up to 30 percent of a household’s income can be designated for monthly mortgage payments [under commonly accepted mortgage qualification guidelines], a 100-basis-point increase in the 30-year fixed rate would reduce the nation’s potential homebuyer pool by approximately 4.2 percent, or 5.3 million households
Eugene apartment investors may be able to rest a little easier knowing that their tenants are less likely to be able to afford to leave given the increased mortgage costs. With the average asking rent/unit around $1,022, landlords may be able to push rents more aggressively in 2018 considering the local housing shortage and rising interest rates.
This is an excellent time to invest in multifamily properties in the Eugene and Springfield areas. The professionals at Pacwest Commercial Real Estate are Eugene multifamily experts. We’re here to help you find the right property to meet your investment goals, and to guide you through the process. You can reach us at 541-912-6583.
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