The Real Signal #119 - Further Signals For Multifamily Bottom
Plus articles on US Existing Home Sales Lowest Since 1995 And More Effect of Los Angeles Fires
Further Signals For Multifamily Bottom
“Apartment sales increased 22% year over year to hit $146 billion in 2024, according to a report that data firm MSCI Real Assets shared with Multifamily Dive.
* Prices continued falling in 2024, but the rate of decline moderated. The RCA CPPI, a measure of apartment prices, dropped 4.2% relative to the fourth quarter of 2023. By comparison, the steepest decline during this cycle was a 13.3% drop in Q3 2023.
* Cap rate increases also moderated, rising only 10 basis points over the 12 months from Q4 2023 to Q4 2024. By comparison, they increased 70 basis points from Q4 2022 to Q4 2023,
Though 2024 was only the second year out of the last five to see sales increases, many investors are confident there will be more trades in 2025. In a recently released survey from Los Angeles-based commercial real estate services firm CBRE, 70% of commercial real estate investors surveyed said they planned to buy more assets in 2025 than last year.
Seventy-two percent of investors told CBRE they preferred multifamily, far ahead of the 37% who favored industrial and logistics — the second most popular sector.
“Investors are preparing to deploy more capital into the U.S. commercial real estate market this year, drawn by the attractive pricing environment and strong fundamentals,” said Kevin Aussef, Americas President of Investment Properties for CBRE, in the news release.” - Multifamily Dive
Scott Choppin Note: Investors preparing to deploy more capital, increased construction lenders returning to market, cap rate increases moderating, sales volumes increasing. All bullish for a multifamily recovery. There is still some debt distress to wash out of the market, however will likely wash out of the system in the next 2-3 years or never appear altogether. This of course all depends on overall US economy performance, with a history of downturns post presidential elections.
All bold/italic emphasis are mine.
US Existing Home Sales Lowest Since 1995
Scott Choppin Note: Affordability at its lowest in history, steep drop in sales inventory, prices going up. All a recipe for something to break.
More Effect of Los Angeles Fires
“After disasters, it’s not unusual for rents (and house prices) to rise. When the town of Paradise, California burned down, around 20,000 people moved to the nearby city of Chico, and rents jumped 10% to 20%, even with post-disaster rent caps in place. In a study that looked at more than a decade of data after hurricanes on the East Coast, “we saw that more frequent and higher-intensity hurricanes resulted in less affordable rent…
In the broader region, Los Angeles has been struggling to fill its housing shortage; the city says that it needs to build more than 450,000 housing units by 2029, but the number of new construction permits has been dropping. Even as the state has passed multiple laws to try to speed up construction, the cost of building and a labor shortage are still problems
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