Dive Brief:
- Apartment prices rose 0.1% from July to August, marking their first monthly increase since July 2022, according to a report that data firm MSCI Real Assets shared with Multifamily Dive.
- Apartment sales volume fell 9% year over year to $9.9 billion in August, partially due to a 25% decrease in individual property sales to $7.1 billion. However, ten large trades pushed portfolio deals up 89% YOY to $2.9 billion to help fill some of the gap. No entity-level transactions occurred during the month.
- Mid- and high-rise apartment transactions increased 6% YOY to $4.8 billion in August. In all, more than 70% of the volume during the month was mid- and high-rise properties. Sales of garden properties decreased 20% YOY to $5.1 billion.
Dive Insight:
Although apartment prices ticked up month over month, they still decreased 5.7% YOY in August. However, that was an improvement compared to August 2023, when they dropped 13.7%.
As sales declines and price decreases have moderated in 2024, mortgage rates for 7- and 10-year fixed-rate loans for apartments have fallen over the course of the year. In December 2023, they peaked at 6.2%. By July 2024, they sat at 5.9%. Still, that’s far above the mid-3% rates of 2020 and 2021.
While the Federal Reserve’s recent rate cut should help, the post-pandemic days of cheap debt are probably gone for good. As sellers realize that, the market should open up.
“Sellers are just getting more realistic about the higher-interest-rate-for-longer environment versus a 100-basis-point 10-year with a 0% Fed funds rate,” Bobby Lee, CEO of Los Angeles-based apartment owner JRK, told Multifamily Dive. “That era is over. I don't think anybody sees us going back there anytime soon.”
Michael Lee, a partner at New York City-based HKS Real Estate Advisors, thinks the Federal Reserve’s recent 50 basis point rate cut will have a significant impact on refinancing and acquisitions of cash-flowing apartment assets. “This cut could further stimulate those sectors,” he said.
Still, more needs to be done before the market returns to health. “Regional banks are still dealing with liquidity issues, and one rate cut won’t solve that,” Lee said.
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