With continued inflation, rising interest rates, and looming economic recession, the multifamily investment world is both feeling the impacts and adapting to them. Multifamily real estate has historically been one of the most resilient asset classes, and in the face of economic headwinds, there are still many opportunities for investors. Read on for our curated list of the most important stories for multifamily investors right now.
The Multifamily Investment News Round-Up is a monthly digest of five “must read” stories from around the Web.
“Regulations at all levels of government account for more than 40% of multifamily development costs, according to a new survey by the National Multifamily Housing Council and the National Association of Home Builders. That marks an 8.5 percentage-point jump from a similar survey done by the organizations in 2018, which asserted that slightly more than 32% of costs were due to regulations.”
Is this the peak? Apartment rents hit all-time high as growth slows (Multifamily Dive)
“The rate of rent growth is decelerating nationally, down 40 basis points from April, and 130 points from peak growth in summer 2021, to 13.9%. Occupancy, a harbinger of overall demand, has also softened in some key regions. Apartment demand has begun to slow in some Sun Belt and Western metros, with occupancy rates down in seven out of the top 30 metros, according to Yardi’s report.”
How the Latest Rate Hike Impacts Multifamily (Multi-Housing News)
“But the rise in interest rates and volatility has led to a sharp uptick in cost of funds for both borrowers and lenders, CBRE Investment Management Chief Economist Sabrina Reeves told MHN. “As a result, lenders are reducing leverage primarily out of concern for refinanceability,” she said.
Lenders have also tightened their underwriting standards resulting in lower loan-to-values, according to George Goyal, founder & managing principal of Three Pillars Capital Group, a Houston-based private equity firm. That also means operators need to bring more equity to the table, which will hurt investor yields because of higher debt.”
The Light: Demand Shifting from Owning to Renting (John Burns Real Estate Consulting)
“High home prices and rapidly rising mortgage rates have created a rosy backdrop for the rental sector, with many prospective home buyers now priced out of homeownership or forced to purchase a smaller home in a less desirable area. A little over a year ago, the monthly cost of owning and renting were virtually identical. Now, owning a home costs $839 more per month than renting. This differential is almost $200 higher than at any time since the turn of the century.”
Urban Catalyst’s Second OZ Fund Hits $100 Million In Funding (Opportunity Zones Database)
“Urban Catalyst announced that it has raised more than $100 million for its Urban Catalyst Opportunity Zone Fund II. Their second OZ fund furthers the construction of new ground-up projects in downtown San Jose by funding ICON/ECHO, a property that will feature property will feature 389 units of multifamily apartments and approximately 511,000 SF of offices. In December 2020, Urban Catalyst closed their OZ Fund I after completing a $131 million raise.”
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