Prices Keep Rising for Apartment Properties, Forcing Investors into Smaller Markets

Investors keep looking for apartment buildings to buy at good prices. The search is leading them to smaller properties in smaller markets.

“Things continue to be very good in multifamily,” says John Sebree, national director of the national multi housing group with brokerage firm Marcus & Millichap.

The amount of money multifamily investors are spending has stabilized at a high level. Investors continue to accept relatively low yields on their acquisitions, even though interest rates rose substantially in 2017 and are expected to rise further. Part of the reason is that apartment rents continue to rise across the country, attracting investors to bid for new properties.

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Source: National Real Estate Investor

Apt. Sector Holds The Line On Vacancies

Even as apartment supply ticked up in many markets, just six of 79 metro areas saw declines in effective rents for the third quarter, writes Barbara Byrne Denham at Reis.

The multifamily sector is containing the effects of increased supply on occupancy, as the national vacancy rate increased by just 10 basis points during the third quarter to 4.5%, a smaller-than-expected uptick, Reis said Tuesday. Even as vacancies rose during Q3, so did both asking and effective rents on a national basis.

The average asking rent grew 1.0% in Q3, just under the average quarterly growth rate of 1.1% seen over the previous six quarters. Similarly, effective rent growth was 0.9% in the quarter, also just below the average seen over the prior six quarters: 1.0%.

Reis notes that the gap between asking rent growth and effective rent growth had widened in recent quarters to 20 bps. Accordingly, the firm’s senior economist, Barbara Byrne Denham, writes that the narrower gap in Q3 suggests that landlords’ offers of free rent have become less aggressive, thanks in part to stronger housing prices that are keeping more potential home buyers in rentals. As a case in point, the Commerce Department reported Tuesday that sales of existing homes were down 3.4% in August, simultaneously with S&P Dow Jones Indices reporting that the S&P CoreLogic Case-Shiller home price index rose 5.9% in July compared a year ago.

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Source: Globest.com