From the NAR:
In the broad landscape of commercial properties, the multifamily sector has fared comparatively better. Demand for space was modest but positive. Net absorption closed the year at 105,458 units. Yet, there are factors which caused adverse impacts in the sector.
The Mutli-Family sector almost always fares better in a downturn. Companies downsize and disappear, people generally don't. Everyone needs someplace to live and an increasing population softens the blow to these investments:
Household formation seems to be one of those factors. More precisely, the prolonged recession of the past two years has taken a toll on the number of people starting a household. Based on household formation data from the Census Bureau, the 10-year average of new households being formed has been 1.3 million per year. However, this number decreased significantly in both 2008 and 2009. From a decade-high of 3.5 million in 2001, household formation dropped to 772,000 in 2008 and only 398,000 in 2009.
That's actually the bright spot of pent up demand. A household is any separate housing space occupied by one or more people. The drop in household formation means there's a lot of people living together who would rather not, such as the adult child living in your basement. If the economy improves in any meaningful way, that log jam will begin to break and cause a spike in demand for rentals and purchases.
That's a big if, of course and the expected rise in interest rates along with the economy strangling uncertainty coming out of Washington could keep the markets going sideways for a while.
For what it's worth, Warren Buffet thinks the Real Estate market will start to rebound in 2011. OK. It's as good a guess as any, if not paricularly original.
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