McLEAN, VA–Freddie Mac has released its quarterly update to the Multifamily Apartment Investment Market Index, or AIMI, and the news does not bode well for investors in these properties.
Briefly, AIMI combines multifamily rental income growth, property price growth and mortgage rates to measure investment conditions for the apartment sector. A rise in AIMI from one quarter to the next implies an increasingly favorable environment for multifamily investment opportunities, while a decline suggests that attractive investment opportunities are becoming more difficult to find compared to the prior period.
AIMI decreased in the second quarter of 2017 nationally and in 13 local markets, Freddie Mac reported. This followed a decrease in the first quarter in all markets and at the national level.
Rising Mortgage Rates
The decrease was primarily driven by a 40 basis point jump in mortgage rates.
“A substantial rise in mortgage rates over the first quarter of 2017 was the main driver of declining AIMI values in all the markets tracked, including nationally,” said Steve Guggenmos, vice president of Freddie Mac Multifamily Research and Modeling, in a prepared statement.
“Annually, AIMI has also seen declines, but largely due to increases in multifamily property prices that have outpaced the growth in rents,” Guggenmos continued.
This moderation is consistent with the GSE's outlook for the remainder of 2017. That said, Guggenmos added that Freddie Mac believes “the multifamily market will continue to be bolstered by strong demand fueled by demographic changes as well as shortages in supply in most markets.”
DC Posted An Increase
The only market to post an increase was Washington, DC, which came in at 5.5%, largely fueled by declining property prices and increasing rents.
Meanwhile, areas with high supply, such as New York City (-4.7%), San Francisco (-10.5%), Austin (-2.7%) and Houston (-0.2%), are seeing rent growth slow more than other markets.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
