Dive Brief:
- Apartment sales volume and values fell again in the third quarter, but stabilization may be in sight, according to a report that data firm MSCI Real Assets shared with Multifamily Dive.
- Apartment transactions dropped 62% year over year to $30.1 billion in Q3, according to MSCI. The market has absorbed declines of 60% or more since Q3 2022. Sales of garden apartments plummeted 63% YOY and mid- and high-rise deals fell 60%.
- Apartment prices also continued their slide in Q3, falling to 12.8%. Cap rates rose 60 basis points YOY to 5.2% at the end of Q3, showing little movement from Q2. Cap rates for mid- and high-rise apartments sat at 5.1% at the end of Q2 and Q3, while they were 5.3% for garden apartments.
Dive Insight:
Although the YOY figures still show large declines, MSCI said that there are signs that the apartment sales market is turning the corner, if not adjusting to a new reality.
In the individual sales market, where investors underwrite one building at a time, transactions only fell 54% compared to more than 60% in the previous three quarters. And, from the second to third quarter, values only declined 4%, showing further moderation in the market, according to MSCI.
Even though things may be stabilizing, there are only certain types of deals being done, according to market observers. “Deals need to have a unique situation or story” to trade, Jeff Adler, vice president of Matrix Yardi Systems, told Multifamily Dive.
Adler, who indicated that Yardi’s data also shows deal volume declines of 60%, said that sales often occur when an owner has a liquidity need or a fund nearing maturity. In other cases, their property may have appreciated a lot over the past few years and they don’t mind selling for less than they could have 18 months ago.
Dallas-based real estate investment firm Darwin German Real Estate bought The Mark at Weatherford, a 355-unit Class A property in Weatherford, Texas, for $70 million last month, a $40 million drop from its price in January 2022.
President Darwin German said the company is seeking similar properties. “We are looking for more deals from motivated sellers on good quality assets,” German said. “Now is the time to buy great properties in good areas. There is still a large spread in bid-to-ask and the only deals come from motivated sellers that must sell.”
But in many cases, if there isn’t pressure to sell, an owner will hold. “If someone doesn't need liquidity, they'll just wait awhile,” Adler said.
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