East Bay Multifamily Outlook in 2017

Recently I had the opportunity to see my friend Mark Lipsett from Pacific Western Bank speak about the East Bay Multifamily Outlook in 2017, and more generally, the state of the multi-family market. This was put on by our trade group East Bay Rental Housing Association, EBRHA which is a fantastic resource for anyone owning income property in Alameda county.

Mark is a banker, so this was delivered through a lending lens, which is to say a relevant one based on data from his institution.

My big takeaways from the talk were the following:

• Rates are up 33% since the election

• The vacancy rate is up from 4.2% to 4.7%

• Construction permits are down 15% from last year

One of the interesting comparisons Mark made was between the Bay Area and Seattle. It costs the average tech worker 55% of his/her income to live in the Bay Area, vs. 34% to live in Seattle. And 40% of those interviewed said they were planning to or wanting to leave the Bay Area due to congestion and the high cost of housing.

Another very interesting data point was that looking back over the past 5 years, we have experienced average rent growth of 60% in the East Bay. Looking forward over the next 5 years, they are projecting a 20% increase. So moving forward we can expect 1/3 of the growth we have experienced recently.

To conclude, the East Bay continues to be a very tight market. Homes are rising quickly in value and supply is much too low for SFR's. There continues to be little new housing brought to market due to the high construction costs. Although many tech workers threaten to leave, many do not. And with the rental market cooling off in San Francisco many who would have left are deciding to stay.

You can see the entire 2017 East Bay Multifamily Outlook presentation with my notes here. Thank you Mark Lipsett.