The Apartment Boom May Not Last Much Longer

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As rental demand soars, an apartment construction boom uprising has occurred across the country. But a new report from UCLA’s Ziman Center for Real Estate suggests that the increase in apartment construction likely only has two more years before it starts waning.

Falling home prices and a rise in foreclosures caused demand in the single-family housing market to shrink in recent years while demand for rental units soared. The rental increase came from home owners who lost their homes to foreclosure and potential home buyers who were waiting on the sidelines until housing market “bottomed out.” Meanwhile, investors have seen big opportunities in rentals, looking to cash in on rising rents and capital appreciation.

“Of course this boom in multifamily construction will have within it the seeds of its own destruction,” UCLA economist David Shulman told the Los Angeles Times. “As rents rise, consumers will shift out of rental into ownership units.”

The supply of apartments likely will outpace demand by 2014, according to the UCLA report. As rents continue to rise, more Americans will opt to own rather than rent, the report suggests.

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