Our Slums of the Future
By: Jonathan M. Lamb. Jonathan M. Lamb is an Economist, Consultant, and Entrepreneur that resides in the Research Triangle of North Carolina.
History has a funny way of repeating itself. Economics is basically simple cycles of boom and bust that repeat time and time again. It is nothing new, everyone has heard that history repeats itself, but fortunes can be make and lost on the timing of such economic cycles. It is all about timing, and timing plays no favorites on smart, young, dumb or ugly, it does not matter who you are, but when it is time it is time. Unfortunately there is no crystal ball that knows when cycles start and end, but when know when a cycle heats up that at some point what was hot will become what is not.
One of the bright spots in our economy since the fall out related to the residential housing “bust” has been the multifamily (apartment) sector. The numbers are scary big, and growing the market, new properties are being built, and old properties are trading hands for bigger and bigger sums of money and lower and lower CAP rates as investors has flocked to stable returns and tangible assets. The question is not what point we are on the economic cycle of the multifamily market or if there is a bubble and when and if it is going to pop, but the question is what will be “hot” and will be yesterday’s news?
Looking back over history just like the economy housing has gone through cycles, areas grow, people move from the high growth area to the next growth area, and the old high growth becomes the decay. Over the last 100 or so years in our county we have seen people flock to cities, then move to the suburbs. As the suburbs grew hosing in cities became the slums, what was expensive became cheap and crime and poverty came in. After a while, the slums started to become an “up and coming area” and with rejuvenation the area was redeveloped and became the place to be again. In some areas this cycle has repeated multiple times over.
The multifamily apartment market that we are building today is bound fit somewhere in this future housing cycle. Our cities turned to slums, then our slums became our suburbs, so will next our booming high end multifamily apartment complexes become the slums of the future? If history repeats itself, what was the hot in multifamily market will become not, and when it is not owners will require less in rents and the cycle will start again.
Only that crystal ball knows when the multifamily boom will go bust, but like everything it will come to an end. There is no reason to fight inevitability, however a little forward thinking will show that our multifamily market will be our future slums, so look around these beautiful new multifamily communities will be our battle ground of future crime and poverty.