October 2022 Multifamily Investment News Round-Up

Multifamily real estate is starting to finally feel the pressure from economic uncertainty in October 2022. In the wake of continued interest rate hikes from The Fed, and general economic downturn, rents have seen declines in some markets. Furthermore, multifamily deals are facing challenges with higher interest rates changing the debt landscape.

Still, there are a number of markets showing compelling multifamily sales volume, and the need for housing remains strong across the US.

The Multifamily Investment News Round-Up is a monthly digest of five “must read” stories from around the Web.

Industry

Apartment demand goes negative for the first time in Q3 (Multifamily Dive)

Jay Parsons, vice president, head of economics and industry principals for RealPage, attributes the drop in demand to the effects of inflation, rising rates and low consumer confidence. “The rental market of 2022 looks nothing like 2021.” Parsons emphasized that the market wasn’t collapsing, as overall vacancies still stand below 5%. “It sure is softening,” he said. “It’s not just normalization anymore.”

Multifamily Deals Challenging in Today’s Environment (Multifamily Executive)

“We continue to see significant changes, volatility, and uncertainty in the space, equity, and debt markets that drive commercial real estate values and transaction volumes,” said Jamie Woodwell, MBA’s vice president for commercial real estate research. “There was a record level of borrowing and lending during the first half of the year. Given market changes, we forecast a significant slowdown for the second half of the year—driven by rising interest rates and capitalization rates and uncertainty among buyers, sellers, and other stakeholders about where market values may lie.”

Macro

The Fed Maintains Its Resolve as Markets Build in Risk (Fannie Mae)

“We expect the Fed is willing to tolerate a modest recession in 2023 to ensure inflation trends have reversed before ending its tightening course. Following the completion of our interest rate forecast, market expectations for the terminal fed funds rate have risen and we believe there is upside risk to our forecast of short-term rates peaking at 4.25 to 4.50 percent in Q1 2023, perhaps approaching 5 percent.”

Markets

Top 10 Multifamily Markets by Sales Volume in 2022 H1 (Multi-Housing News)

“The U.S. multifamily market had an exceptional performance from an investment standpoint during the first half of the year, according to Yardi Matrix data. Overall national multifamily sales volume surpassed $101 billion in the first six months of 2022, outperforming the $67 billion volume registered in 2021 during the same interval, while the average price per unit rose 28.4 percent year-over-year, to a new high of $218,377. The number of assets that traded also increased, from 2,362 properties during the first half of 2021 to 2,961 in 2022.”

Investing Strategy

Seeking Stability, NYC Investors Shift From Office To Multifamily In Q3 (Bisnow)

“Multifamily has become a preferred asset class for investors again after New York City apartments had seen their values fall for years, with cap rates falling and dollar volume in Manhattan up more than 50% over the previous four-quarter average, according to Avison Young data. By contrast, in the third quarter, $745M of Manhattan office properties traded, 63% below the trailing four-quarter average.”

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