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Here's What's Happening In The Market, Here’s What This Means For You
Why Apartment Cap Rates Are Projected to Remain Low
Apartment cap rates are projected to stay low in the next couple of years. For these reasons:
1. Core inflation will likely stay elevated, which should force the Fed to push up rates. Rising Treasury yields are projected to squeeze the yield gap for apartments, and with strong prospects for NOI growth, apartment yields are projected to stay low.
2. Lower vacancy rates and accelerating rent growth will support apartment income. Demand for multifamily property is expected to remain strong and will continue to outpace supply.
3. While the pace of new construction has picked up significantly compared to the lows seen a decade ago, this is projected to not be enough to make up for current housing shortfalls. Until construction ramps up, housing shortages will persist, increasing demand for the rental market.
4. Rental growth for apartments is also projected to continue to outpace inflation, making it a good hedge against the pressure of rising prices.
Orange County
Orange County multifamily had 14 Closed Sales Last Week. This is the same number of closed sales as the prior week. The Closed Sales Average Days on Market sales was 44 days. This is a little bit higher than normal. It usually runs at around 30 days plus or minus a few days. There were 10 Transactions that Sold At or Above The Asking Price. This stat shows that there is still a strong demand for Orange County multifamily properties as buyers are competing for properties and have to increase their original offer price in bidding wars.
The Orange County Absorption Rate dropped from 2.27 months to 1.85 months. This is another indication of a tight buyer’s market. The number of active listings dropped again for the fourth consecutive month and is now at the lowest number of active listings since October of 2020. The total number of closed sales last month was up by 11 from the prior month and still shows a good level of activity in comparison to earlier this year. Even with the low level of inventory, we’re still seeing the number of closed sales outpace 2018, 2019, and 2020. The Average Price Per Sq. Ft. dropped quite a bit from $628 to $544.
The Orange County SALE OF THE WEEK is 3 unit building on Lido Ln. in Anaheim. The property was listed at $1,095,000 and sold for $1,105,000 in 34 days. The seller gave the buyer a closing cost credit of $20,000. So, the net selling price was $1,085,000. Built in 1962 the units consisted of one 3 bedroom 2 bath and two 2 bedroom 1 bath. The rents were already close to market with the 3 bedroom renting for $3,200 and the 2 bedrooms renting for $2,100 each. There are two double garages on the alley in the rear of the building. The property sold at $364 per sq. ft. The average price per sq. ft. in Anaheim is $446. Based on the income and expense info provided, the gross rent multiplier was 12.33. The average gross rent multiplier for Orange County is 14.95. The cap rate was 6.2%.
Orange County listing inventory had a good strong week with 18 new listings which brings the total number of active listings back up to 132 total listings. The typical number of weekly listings is usually somewhere between 10 to 15 new listings. The months of inventory remained the same at 3 months.
List of Closed Sales
Live MLS Link PDF Link SALE OF THE WEEK
Southern California
Long Beach multifamily had 8 Closed Sales Last Week. This is down from the prior week where there were 13 closed sales. The Closed Sales Average Days on Market was normal at 35 days. There were 5 of the 8 Transactions That Sold At or Above the Asking Price. With the majority of transactions selling at or above the asking price, Long Beach multifamily is showing strong investor demand just like Orange County.
The Long Beach multifamily Absorption Rate increased from 1.7 months in the prior month to 2.15 months currently. The Days to Sell Average was up to 38 days last month after dropping to just 28 days in the prior month. The number of active listings dropped again for the third consecutive month and is now at the lowest number of active listings since December of 2019. As you can see here the number of new listings each month has dropped slightly each month for the last 4 months. The total number of monthly sales was down last month but still remained strong in comparison to earlier this year and is better than most of 2020.
For Long Beach multifamily listing inventory, there were 11 New Listings Last Week. This is about average for the number of weekly new listings for Long Beach. The Total Number of Active Listings was up slightly to 95 total listings. The Months of Inventory remained at 3 months. The Active Listings, Dollar Volume slipped down to just over $203,000,000. This is the lowest Active Listings, Dollar Volume since December of 2019.
List of Closed Sales