There is Still a Disconnect Between Housing Supply and Demand Despite Pandemic

When asked to make predictions about what’s coming next in the apartment James Flynn, CEO of Lument, admits that his crystal ball has been a little “foggy” the last couple of years with concerns about the economy, inflation and apartment prices.

And that was before COVID-19.

While Flynn notes that there has been a shift since the pandemic started and the apartment market won’t grow at the same rates it has over the last decade, he still likes the sector’s supply-and-demand fundamentals once the COVID situation is settled.

“When you look at the housing needs relative to the population of the economy, there’s still a fairly large disconnect,” Flynn says. “Across the board, we certainly do have an affordability issue, which is something that we really would like to help resolve. But fundamentally, things are still pretty good.”

Still, COVID is a significant issue in the near term. “What everyone is fearful of with respect to COVID is there are a lot of small businesses out there, and there are a lot of people that have been surviving with support from their local governments and the federal government with extended unemployment benefits,’ Flynn says.

Flynn says there are still questions about what happens when those benefits run out. “Before there is a resolution for the health issue with treatment or a vaccine,” things will remain up in the air, he says.

Flynn thinks transaction volume and prices should remain relatively stable and may even increase modestly, assuming there is resolution around renter subsidies and COVID treatments.

“If we’re talking next year and we were in the same place in terms of where we were with those two things [COVID and a stimulus], I think we wouldn’t have a very positive year in terms of the market,” Flynn says. “I’d like to think the timeline would be a little bit more accelerated.”

Ultimately, the health problem needs to be solved before the economy can come back. “Until then, it’s hard for me to say that things are going to be rosy next year,” Flynn says. “But I think long-term, the apartment space is fine, even though I think there are some shifts out of the urban environment.”

Like many things, including the struggles of retail, COVID accelerated a trend that was already occurring. 

“Now with the advancements in technology, as we’ve seen, it doesn’t matter or matters less where you are working,” Flynn says. “Many smaller and midsize cities can become larger than they were and offer alternatives to some of the bigger environments, like New York, San Francisco and Chicago and places like that. So I think there is a little bit of a shift there.”

But Flynn believes those large cities are probably at their lowest point right now and will come back. “There is still a tendency to want to be in those cultural centers and those business centers,” he says. “I think that will come back, but they will probably be a bit different than they were just a few years ago.”