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Here's What's Happening In The Market, Here’s What This Means For You
Fed Clears a Path for Higher Interest Rates Next Year
The Federal Reserve Open Market Committee announced some significant changes in monetary policy: a faster tapering of bond purchases and the possibility of as many as three rate hikes next year. The reasons are concern about inflation, which has been more dogged than the institution had expected, and an improved job landscape. The question for commercial real estate is how the combinations of actions will affect markets.
Interest rates could rise up to three times next year, with the end of 2024 seeing the Fed’s key rate at 2.1%, according to the New York Times. According to Oxford Economics, this could mean three 25-basis point hikes in 2022, three in 2023, and two in 2024.
Both the interest rate and tapering news could have a significant impact on CRE. An increased rate at which banks can borrow means higher interest rates all around, although many in real estate have been expecting this to happen in the near future for some time. Tapering reduces the amount of capital being injected into the economy, lowering the pressure on finding places to invest and, with lower demand, lower prices and values in theory. However, it’s important to remember that there are enormous sums of capital already in markets.
Here's more information about the expected upcoming interest rate increases.
Orange County
Orange County multifamily had 9 Closed Sales Last Week. This is on the low side of the weekly average of closed sales for Orange County. The Closed Sales Average Days on Market was high than normal at 58 days. The inflated average days on market was caused by 1 closed sale being on the market for 286 days. Out of the 9 Closed Sales Last Week there were 5 Transactions Sold At or Above Asking Price. There was just 1 All Cash Transaction Last Week.
The Orange County SALE OF THE WEEK is a 4 plex on Corsican Dr. in Huntington Beach. The property was listed at $1,850,000 and sold for $1,925,000 in 3 days. The major cross streets are Goldenwest St. and Warner Ave. The property is located in a cul-de-sac, near Bella Terra shopping center, and was built in 1968. The units consist of one 3 bedroom 2 bath, two 2 bedroom 2 baths and one 1 bedroom 1 bath. Two units were recently upgraded with beautiful wood flooring, stainless steel appliances, white cabinetry, and completely renovated bedrooms and bathrooms. There are 4 enclosed garages. The property sold at 19.38 x gross and a 3.5% cap rate.
Looking at Orange County multifamily listing inventory, Orange County had 8 New Listings Last Week. Over the last couple of months, this has been about normal for the weekly number of new listings for Orange County. The Total Number of Active Listings remained at 100 or above for another week and now stands at 100 total listings. The current activity looks strong with 16 listings moving from active status to Active Under Contract Last Week.
List of Closed Sales
Live MLS Link PDF Link SALE OF THE WEEK
Southern California
Long Beach multifamily had a strong week of sales activity with 15 Closed Sales Last Week. Long Beach typically has been averaging about 7-10 weekly closed sales. The Closed Sales - Average Days on Market was normal at 39 days. 9 0f the 15 Closed Sales Last Week were Transactions That Sold At or Above Asking Price.
The Long Beach SALE OF THE WEEK is a 4 plex on Carroll Park. The property was listed at $2,000,000 and sold for $2,000,000 in 10 days. Built in 1923. Properties like this and in this location are rarely available. Located just 3 blocks to the ocean. The property consists of 4 different structures. There’s a 2 story 5 bedroom 2 bath Craftsman Chalet Bungalow with approx. 3,000 sq. ft., two 2 bedroom 1 bath units and a studio above the garage. The total building size is 5,225 sq. ft. Existing rents were approx. 20% under market. The property sold at 24.69 x gross on existing rents. The price per sq. ft. was $382. The average price per sq. ft. in Long Beach is $527.
Long Beach multifamily listing inventory had 6 New Listings Last Week. The Total Number of Active Listings dropped below 70 listings for the first time this year and now stands at 68 total listings. The Months of Inventory remained at 4 months. The Active Listings, Dollar Volume dropped to just over $170,000,000. This is the lowest Active Listings, Dollar Volume we’ve seen since November 2017 when prices were a lot lower than they are currently.
List of Closed Sales
Live MLS Link PDF Link SALE OF THE WEEK