It’s one of the bigger questions in the commercial real estate market today: When will the multifamily market finally cool down?
Multifamily has long vyed with indusrial as the darling asset class of the commercial real estate industry. Investors love apartment buildings today, and developers are building new ones in the hearts of cities across the Midwest. But the sector’s hot streak can’t last forever, right?
One reason for the enduring strength of multifamily might be that it’s often cheaper to rent than it is to buy a home. For proof, consider the results of a recent study by LendingTree.
LendingTree ranked the 50 biggest metropolitan areas in which it is cheaper to rent an apartment than it is to buy a home. The Midwest fared well, landing three cities in the top 10. In fact, Louisville topped LendingTree’s list, ranking as the city in which it is most affordable for people to rent an apartment versus buying a home.
Milwaukee came in second on the list, while Chicago ranked 10th. You can read the entire list here.
So, yes, there are plenty of reasons why renting is so popular today. Many people are choosing to rent, both empty nester and younger consumers, because they want to live an urban lifestyle where they can walk to public transportation, shops and restaurants. Today’s newer apartments boast an impressive array of onsite amenities.
But don’t discount the affordability issue. The cost of single-family homes continues to rise. At the same time, mortgage interest rates have increased, too, making a monthly mortgage payment more expensive. As owning a home becomes pricier, it makes renting an apartment look all the more attractive.
And in good news for apartment developers and investors? This trend doesn’t look to be changing soon.