Financial analyst Matt Argersinger discusses the overbuilding of multifamily properties, impact on developers, and outlook for REIT investors. Topics include the increase in new apartments, affordability concerns, challenges faced by builders, and analysis of Mid-America Apartments resilience in oversupplied regions.
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Quick takeaways
Oversupply of new apartments in hot cities due to remote work has impacted renters, developers, and investors.
Mid America Apartments maintains strength by acquiring properties outside city centers and in the Sunbelt region.
Deep dives
The Impact of Remote Work Migration on the Multifamily Market
The podcast discusses how the rise of remote work during the pandemic led to a migration towards cities like Nashville, Austin, and Denver, resulting in an oversupply of new apartments in these areas. The mismatch between supply and demand has affected renters, developers, and investors in the multifamily market. The trend towards warmer locations and increased work flexibility contributed to the surge in construction but also raised concerns about potential overbuilding.
Challenges Faced by Mid America Apartments due to Oversupply
The podcast highlights Mid America Apartments' experience with stagnant or declining rents in various markets due to oversupply issues. Despite facing headwinds from oversupply, Mid America Apartments has managed to maintain a strong position by strategically acquiring and developing properties outside of city centers and in the Sunbelt region. The company's balance sheet strength allows it to navigate the current market challenges and capitalize on acquisition opportunities.
Market Outlook and Potential Opportunities in the REIT Sector
The podcast discusses the negative performance of the real estate sector in the S&P 500 and the implications of higher interest rates on REITs. While oversupply concerns impact multifamily REITs like Mid America, there is optimism about the sector's resilience in inflation and interest rate environments. The discussion emphasizes the discounted valuations present in the REIT sector, recommending investors to consider opportunities in companies like Prologis, Simon Property Group, and others for long-term growth potential.
Last year, 440,000 new apartments went on the market – a 36-year high. This year, even more new builds are coming. That’s good news for renters, but perhaps less good for developers. What about REIT investors?
Matt Argersinger and Ricky Mulvey discuss the state of the multifamily market and why REITs (of any stripe!) aren’t out for the count quite yet.