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What Happens to Multifamily Investments During a Recession?

For real estate investors, the past decade has been profitable as property values and rental rates increased. However, recent changes, like higher interest rates and a bearish stock market, raise concerns about a possible recession.

In the past, during the 2007 housing market crash, home prices plummeted due to a flood of foreclosed properties. However, multifamily rents behaved differently. During recessions, demand for rentals tends to rise as people struggle to buy homes or face foreclosure. While rents in large apartment properties did drop during the Great Recession (0.3% in 2008 and 4.1% in 2009), they quickly rebounded.

In fact, multifamily rents tend to outperform other property types during recessions and recover faster afterward. By the end of 2010, rents were rising again in most surveyed metropolitan areas. Even during the peak of the Great Recession in 2009, with a 10% unemployment rate, many rental properties increased rents just one year later.

This is good news for multifamily investors. Even when U.S. asking rents dropped by 4.1%, it wasn’t a significant disruption. For a property renting at $1,500 per month, a 4.1% reduction is only $61.50 per month. This minor dip doesn’t justify giving up on multifamily real estate, especially for those planning long-term investments for consistent cashflow.

Since 2000, U.S. multifamily rents have increased on average by 4.17% annually, even considering setbacks from the Great Recession.

Despite economic uncertainties, housing remains a fundamental need, and people prioritize it over other expenses. So, investing in multifamily properties is advisable, as they have historically shown resilience and profitability over the long term. 

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