Multifamily Investors Primed To Pay A Premium

Multifamily investors are increasingly willing to pay more than ever before for the asset class, according to a new analysis from Yardi Matrix. The average price per unit climbed 21.6% in 2021.

Yardi logged record-high property sales and prices in 2021, when properties traded for an average of $192,105 per unit. Of the 83,000 properties reviewed by Yardi, 4,500—or about 5.3 percent—sold at least three times over the last decade. And the average compound annual growth rate for the repeat-sale properties averaged 17.7% nationally.

But while rents ticked up by 14% last year, rent growth increased even more. Multifamily rent growth has clocked in above the long-term average for the last half-decade, except for during COVID-19 lockdowns. Meanwhile, the average price per unit climbed 21.6 percent in 2021, the biggest one-year jump in recent memory.

Among investor favorites: assets geared toward working-class renters. They have the potential for high rent growth because those properties have relatively low rents and are in markets with above-trend rent growth. Strategically located value-add properties will also command a premium, particularly those in secondary markets.

The Pulse of the Market

Orange County – WOW! 22 Closed Sales Last Week, might be the highest ever closed sales for 1 week. The Days on the Market was just 12 days. The majority, 15 of the 22 closed sales sold at or above the asking price. Investors just love Orange County multifamily. The Days on Market just about everywhere continues to decline as investors remain in bidding wars for the most desirable properties.

WHAT TO EXPECT:
Inflation and interest rate increases have yet to affect the Southern California apartment market. With rents continuing to increase I don’t see much of a change in investor interest or sales activity in the next 3-6 months. It’s still a good time to buy and with the stock market falling as it has over the last couple of months, real estate is still a good place to put your money.