“Apartment demographics are good…”


With the profound disruption in our economy, the bright prospects of certain industries have been clouded by the overall bad news.

One area that promises strong growth upon the recovery is the multi-family industry.

In a recent earnings call, Terry Considine, CEO of AIMCO, summed the situation up nicely:

However, since our last earnings call in November, the financial markets and the economy have continued to deteriorate. Just this morning, we learnt that the January job losses were almost 600,000 and that the unemployment rate has increased to 7.6%. Most observers predict more pain to come, and as we make our plans for the next two years, were preparing with clear memories of prior hard times. We recognize that government rescue efforts may prove the right prescription but they create costs and uncertainties and are unlikely to be instantly effective. We want to be prepared if unemployment increases even beyond current expectations. We want to be prepared if we faced two or more years of hard times, and we want to be prepared if the recession years are followed by substantial inflation.

And as we wrestle with these serious and near-term problems, we want to keep a clear focus on longer term values. Apartment demographics are quite strong in the years ahead and the development of new supply has very nearly stopped. When the hard times end and they will, we expect business to be again quite good.

The key to easing the pressure on the multi-family industry will be a recovery in the jobs picture. When that happens, the apartment industry should benefit from two trends: new household formation that was delayed by the softness in the economy, and home owners returning to the rent rolls as they leave houses that they had bought during the real estate boom.