The demand for apartments significantly impacts the real estate market. High demand can lead to increased investment and development, particularly in areas where there is a shortage of housing. This can result in higher property values and rental rates. Conversely, a decrease in demand can lead to a drop in property values and rental rates. Factors such as economic growth, affordability issues, and regulatory changes can also influence the demand for apartments and, consequently, the real estate market.
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Because of slower economic growth in 2022 and 2023, apartment demand in the U.S. is projected at 240,000 units in 2020. Millennials continue to move into homeownership at a modest pace due to affordability issues, but multifamily demand remains sufficient enough. New York Metro's 9.2% year-over-year (YoY) drop in multifamily investment was partly caused by the implementation of new rent control regulations. Greater Los Angeles had a 9.8% drop in investment YoY, but the San Francisco Bay Area had a 7.4% increase. Buying or building in the suburbs remains the best bet based on market performance and investment returns. Investors and developers should consider smaller metros – under 2 million population.