Why do you think multifamily investments seem to be the property of choice right now when compared to other commercial opportunities? 

DB: Availability of financing is the key factor and answer to that question. Multifamily is the only real estate property type wherein financing can be secured via the federal government.

This is perhaps the biggest factor in what is driving market values. There is no other property type in which you can secure a 4.5% loan with a 30year term without personally guaranteeing the loan.

The GSEs (government-sponsored entities) Fannie, Freddie and HUD account for 85% of all multifamily loan originations. HUD is the primary source for new-construction financing, and Fannie is the primary source for stabilized Class B-type assets.

Local commercial banks are the only lending sources for office, retail and industrial properties, but their capacity to make loans has been inhibited by recently revised government-mandated, capital-reserve requirements. The local banks simply cannot compete with the federal government when it comes to loan terms, and multifamily is the only property type that benefits from such a restrictive lending environment.

In what way does the looming prospect of inflation affect the multifamily sector?

DB: Historically, inflation has averaged around 2.5% per year, and there is a general consensus among economists that inflationary pressures will soon be felt at much higher levels.

Apartment investments offer a hedge against inflation in that leases are short term, usually 12 months or fewer, as opposed to five- and 10-year terms usually associated with office and retail properties.

As well, rising inflation will result in higher interest rates, which will narrow the pool of qualified buyers for single-family homes. If and when these projections come to fruition, the likely result will be higher occupancy and rent growth for multifamily properties.

Could rising apartment occupancies be a reflection of home ownership fading somewhat when compared to years past?

DB: There is significant evidence that the American dream of home ownership has diminished greatly in the last decade. Home

ownership has fallen to 66.5% of the adult population, down from 69.2% in 2004.

A recent Harris Interactive poll showed that 70% of Americans aspire to homeownership, down from 77% a year ago. The fallout from the boom years of 2005 through 2007 has resulted in a 22% negative equity on home mortgages. Most of these homeowners who are upside down will most likely be entering the rental pool in the not-toodistant future.

Oklahoma’s single-family picture is much brighter in that only 6% of Oklahoma households have negative equity in their homes. The flip side is that fewer younger people have the required 20% down payment now necessary to become first-time home buyers. Most young professionals earn good incomes, but their credit-card debt outweighs the necessary savings required for such a large down payment.

Aside from purely financial considerations, are younger people today more prone to rent than in generations past?

DB: Yes, I believe so. My generation, the “echo boomers,” seem to have a different mindset than that of our parents. Anecdotal evidence suggests that we are about seven years behind the historical timeline of our parents when it comes to achieving life’s milestones: marriage, kids and buying a house.

It is estimated that there are around 75 million echo boomers, which makes them the largest demographic group in the U.S., behind the baby boomers. Four million echo boomers will turn 18 each year over the next decade, and while they suffered disproportionate job losses during the Great Recession, Bureau of Labor Statistics household survey data shows they are now getting the lion’s share of net new jobs as the economy recovers.

As a result, this age group is projected to add an additional 7 million renters to the national pool.

According to a study generated by Harvard University’s Joint Center for Housing Studies, 80% of all households whose residents are under the age of 25 are renters. So, over the next decade, the largest demographic group in 40 years will be flooding the rental market.

Generally speaking, what are some of the emerging trends you are seeing in the metro area?

DB: I think the biggest trend I have noticed is that young people are either returning to or staying in Oklahoma City after graduating college.

Historically, most young professionals have fled to the coasts or gone south to Dallas, but the overall dynamic seems to be changing. High-quality job opportunities in the energy and medical industries, coupled with the low cost of living, are contributing to recent graduates thinking twice about heading out of state.

Another significant factor contributing to resident retention is the emerging vibrant urban community currently taking shape Downtown. There has always been a strong demand for Downtown housing, but the supply was not yet sufficient to meet the younger demographic demand.

The high-end Downtown condominium developments were not economically feasible for most young professionals, but this is starting to change in a big way.

There are several high-end apartment communities either planned or in some stage of development that are projected to fit within the desired parameters of this younger demographic. These developments will spur even more young professionals to think twice about leaving OKC in order to become a vital part of a vibrant urban community wherein they can live next to and connect with like-minded people.