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How will class A units be effected and what should our position be? | International Residential Real Estate Investors Association
Thursday August 17th 2017

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How will class A units be effected and what should our position be?

The impact of the “Great Recession” on the mind of households appears to be a lasting one.  First, the sources of debt and liquidity that drove much consumerism has been substantially tightened.  As a result, even if consumers were inclined the path to unfettered spending is on a short leash.  Add to this, the extreme unemployment and underemployment and the die seems cast that spending will not be viewed the same for a very long time.

This implies that consumers will gravitate to lesser solutions for old problems.  So, an older property with strong amenities suddenly looks much more attractive than it may have a few years ago.  This is bad news for A properties.

Class A properties will either require a rapid reduction in value (foreclosures are creating some of these changes) or owners will have to determine ways to increase the household value of their units.  In my opinion, offers to increase resident density are likely the best solution to this issue.

I do not see the situation as all bad news however.  The increased down payment requirements and tighter credit restrictions is going to increase the proportion of renters and over the course of time all apartment properties should benefit from this including Class A units.

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