Capitaliza

Multifamily, Recession- Proof Investment

By: Kenneth Fantes, Capitaliza Corp. Cofounder

Joe Davis, Vanguard Global Chief Economist, President of Investment Strategy Group, and one of the most important economists in the United States, gave some comments on CNBC about fears about the possibility of an economic recession by 2020.

Although there are some troubling signs about a possible recession, such as the reversed performance curve and ongoing trade fights between the Presidents of the United States and the Republic of China, Donald Trump and Xi Jinping, respectively, the U.S. economy enjoys steady growth, and employment is on the rise, although with a little slowdown.

The Multifamily industry has seen a very positive performance. Occupancy rates are high, demand continues to grow and the construction of units continues in many cities in the country, even though the numbers still low in order to cross the deficit of previous years.

In case of a recession, the Multifamily sector will be positioned with respect to other sectors to withstand the economic blow because of the strong demand that constantly exists. Luxury assets would be more affected than working-class housing, traditionally favored by the demographic need. With the costs of home acquisition, financing out of the reach of many, and the pace of demand amid the shortage of construction workers, demand for multifamily is expected to stay stable.

This demand for multifamily rents is leveraged by the family structure, which is exerting a considerable pressure and is also constantly encouraged by both the “Millennials” generation, who has postponed the adoption of their homes, and the “Baby Boomers” generation, which is often reducing the size of family homes to rental assets by choice.

Simply put, the Multifamily industry is very well positioned and ready to handle a recess. The only thing we recommend at Capitaliza Corp., is that the property should be located in a solid job market, has a high cash flow, and it can withstand an impact while still generating the returns for our clients and gaining a capital gain at the end of the cycle.

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