Here's how to sleep at night during a market downturn.

Inflation is higher than it's been in decades, signs of more supply chain problems to come are increasing, and the stock market is down over 20% on the year. It's looking like we may be close to a recession, but that doesn't mean you should panic.

RECESSION-PROOF ASSET CLASS

Multifamily Properties

Many would-be single-family homeowners are opting to rent, driving up demand for multifamily properties. Moody’s Analytics found the average single-family home is 43.7% more expensive than it was in 2019, which in turn is driving increased demand for multifamily units. 

Other factors supporting this statement include, 

1. There is a low supply of affordable housing and apartments nationwide.

2. There is a high demand for apartments and communal living from millennials, seniors, and immigrants

3. There has been a disruption in the supply chain for the last two years, which has led to an additional shortage of inventory in the residential living segment.

4. Everyone needs a place to sleep.

5. Downsizing from homes to apartments is common during a recession.

6. Prices are at an all-time high and outpricing many home buyers.

7. The presence of too much liquidity (cash) in the market together with low-interest rates guarantees high home prices for the next 2-3 years.

To lose tenants or “not create income”, there would need to be an oversupply of apartments and experience a trend of lowering rents as owners compete with one another. This is not, nor will it be, the case during a recession when the supply of available homes is already undersupplied, and people are downsizing from larger homes or luxury-style living.

Even if apartment investors take advantage of this, astute investors can further shield their investments from a future recession by choosing well-placed assets in thriving markets such as Florida, Texas, Arizona, the Carolinas, etc.

CONCLUSION: 

So is multifamily real estate recession-proof? I would say so, so as long as the asset is selected correctly and located in a well-rounded thriving market!