AH3 Investments LLC

American renter households grew three times faster than homeowner households in Q2 of 2024. Since the pandemic, mortgage payments have risen by 90% and rents by 23%. Barring a major recession, we believe apartment fundamentals will outperform historical norms. https://lnkd.in/gYFkB8GS

Here are the latest multifamily permitting numbers for the Top 50 largest metro areas compared their cycle peaks. And no surprise: The numbers continue to go down, down, down nearly everywhere ---> pointing to significantly reduced completions by the second half of 2025 or 2026. -- Here's where T-12 multifamily permits are down more than 60% from the 2021-2023 peaks: >> Philadelphia, San Antonio, West Palm Beach, Portland, Oakland, St. Louis, Baltimore. -- Down 50-60% from peak: >> Houston, Seattle, Minneapolis, San Francisco, Nashville, Denver, Jacksonville -- Down 40-50% from peak: >> Dallas, Orlando, Raleigh, Atlanta, Boston, Chicago, Orange County, Salt Lake City, Northern New Jersey, Indianapolis, Las Vegas, Detroit, Richmond. Markets with lesser declines are generally places where permitting and construction never soared especially high. Still a bit surprising that Phoenix and Austin aren't down more than they are given the massive peak numbers in both spots, though it seems many of those permits will struggle to convert into starts. As a quick refresher: Apartment permitting surged to multi-decade highs after COVID due to record-high demand, cheap debt, large rent growth plus cap rate compression between asset classes. That resulted in today's peak supply (completion) numbers. But that isn't going to last... and you can blame higher rates, flat/falling rents, lower property values, sticky construction costs and challenges finding equity (in part due to investors looking to buy existing deals below replacement cost). Lastly: Not only are permits down nearly everywhere, but they're trending below pre-COVID norms in a number of key markets. For example, T-12 multifamily permit volumes are now DOWN MORE THAN 20% compared to 2015-2019 averages in key markets like Dallas, Houston, New York, Seattle and Chicago (among others). If it sticks, these numbers suggest 2026-2028 supply levels could look more like the depressed numbers of the early 2010s than the elevated numbers of the late 2010s. It appears we're trending toward the tail end of a cycle, and soon could be entering a new one. #multifamily #housing #apartments

Rent control? Since 2010, 30% fewer housing units have been built in the U.S. than were needed to match households formed. We have a housing shortage and rent control is the surest thing to make it worse.

It’s easy to underestimate the scale of change in the datacenter space…