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Multifamily Dive reported that U.S. apartment building sales in April declined 74% YoY to April. The data was shared with Multifamily Dive by data firm MSCI Real Assets. All multifamily asset classes saw declines. Both individual asset and portfolio sales declined by 75%. Garden and mid-and-high-rise sales dropped 75% each. Despite the dip in sales, multifamily continues to be the most liquid of all commercial real estate sectors, according to MSCI. CEO of Nityal Capital, Swapnil Agarwal, told Multifamily Dive that buyers are finding it difficult to make the math work in the current environment. The high-interest rates are leading to a negative leverage situation and negative cash flow. He added that even if purchasers wanted to buy, they are finding it difficult to get financing for their deals. In a report published last month, CoStar revealed that $14B worth of apartment buildings were sold in the first quarter of this year. This again represented a 74% YoY decline in sales. The sales plunge in the first quarter was the largest annual sales decline for any quarter since the 77% decline in the first quarter of 2009. The first quarter accounted for $14B of sales, the lowest in any quarter since 2012, except for Q2 of 2020 when lockdown restrictions were implemented. In Q4 of 2021, multifamily sales reached a peak of $116B.
The decline in sales comes after two record years for multifamily sales. According to Yardi Matrix, national multifamily transactions reached $223B in 2021 and $184B in 2022. For a long time, the multifamily was the top performer among commercial real estate asset classes. Dallas, Phoenix, and Tampa were the top choices for purchasers because of their unregulated rental housing market and rents rising more than 20% YoY. The multifamily market is expected to add 425,000 units this year after delivering 325,000 last year. Markets predicted to receive this influx of units include Dallas (28,000 units), Austin (20,000 units), Miami (19,000 units), Houston (17,000 units), and Phoenix (16,000 units). Apart from causing a fall in apartment sales, rising interest rates have also resulted in declining apartment-building values. Building owners are hesitant to sell at lower valuations. A similar situation can be seen in the residential market too. Green Street, which tracks publicly traded landlords, discovered a 20% drop in building values from their highs in 2021. The decline in sales comes when there is an affordability crisis in the country. According to Apartment List, apartment rents increased by 2.6% nationwide in March. However, the rate of annual rent growth is reducing and is well below the 18% seen in 2021. |
