November 2022 Multifamily Investment News Round-Up

As the holiday season approaches, macroeconomic questions remain for passive multifamily investors, particularly around inflation and interest rates.

Rent growth continued to slow overall, with individual MSAs seeing varied impacts. Even with a more challenging lending environment, positive signs remain for rent growth as more would-be homebuyers are being forced out of the market due to mortgage rates. Read on for the latest happenings in multifamily investing.

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

Industry

AvalonBay exec: Inflation, not demand, drove rent growth this year (Multifamily Dive)

“But according to Thomas, “there was no magical new demand for apartments that came out of nowhere … and there were no rapacious landlords pushing rents up by crazy amounts,” he said. “What we had was inflation, not generated by any of us but by the difficulties of COVID and the supply pipeline and because of significant fiscal stimulus as a result of global monetary policy.”

Residential Rent Growth Slows Nationwide, Resumes Regular Seasonal Shifts (Bisnow)

“The median asking rent for U.S. apartments rose 7.8% year-over-year in October to $1,983, the smallest annual increase since August 2021, Redfin reports. Rents declined 0.9% nationwide month-over-month. October was also the fifth consecutive month in which annual rent growth decelerated, with rents rising at about half the pace they were six months earlier, the company said. “

How the Rise in EVs Will Steer the Multifamily Industry (Multifamily Executive)

“Multifamily needs to defend against and capitalize on the impact that EV adoption is going to have on properties and portfolios over time,” Wise says. “It’s not inconceivable that by 2030 you could have 25% of your vehicles on-site being EVs. In a typical 300-unit apartment complex, that’s 80 or 90 EVs. And then 10 years later, you could be at 90%.”

Macro

Fed Official Warns Inflation Fight Has ‘Ways to Go’ (Wall Street Journal)

“Mr. Waller said he was open to slowing down rate rises at the coming meeting. He said officials are focusing attention on the ultimate level of rates rather than the pace of increases partly because they don’t want investors to think their inflation-fighting resolve was weakening….Mr. Powell’s discussion of a higher endpoint for rate rises was intended to “drive the point home” that slowing rate increases wouldn’t mean the Fed was closer to ending them, he said.”

Investing Strategy

CBRE: Spreads widen 4 basis points on multifamily loans (Multifamily Dive)

The pullback of debt funds has impacted LTVs, according to David Fletcher, managing director and head of acquisitions at Excelsa, the Bethesda, Maryland-based U.S. real estate investment arm of Excelsa Holdings. “With debt funds pulling back, warehouse lines, margin lines and repo lines were closed,” Fletcher told Multifamily Dive earlier this year. “That investor, who was using debt fund capital to get to an 80% LTV in a sub 4% cap rate environment — or sub 3% cap rate in certain cases — cannot secure that financing now.”

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