Freddie Mac Multifamily Index Turns Negative

The Freddie Mac Multifamily Apartment Investment Market Index fell by 0.3% in the second quarter, after posting a quarterly increase of 1.8% in the first quarter of 2020. NOI also fell, by 1.2%, marking the first time in index history where AIMI and NOI were negative together in the second quarter.

AIMI combines multifamily rental income growth, property price growth and mortgage rates to provide a single index that measures multifamily market investment conditions.

The AIMI decline is due primarily to negative NOI in the second quarter, which is the first time that has happened since 2009, as well as mixed property price growth.

Falling mortgage rates have been one bright spot. On an annual basis, AIMI rose by 6.1% as mortgage rates decreased by more than 60 basis points—to 67 bps, for the fourth consecutive quarter. This is the fourth consecutive quarter in which rates have decreased by more than 60 bps on an annual basis.

“Despite the drop in the quarterly numbers, AIMI has increased over the year driven by another substantial drop in mortgage rates,” said Steve Guggenmos, VP of Freddie Mac multifamily research and modeling in prepared remarks.

While AIMI results for the quarter were mixed, they were generally negative. The country as a whole, as well as 20 metropolitan markets, saw AIMI decline while only five metro areas experienced an increase.

NOI growth was negative in the nation and in all markets except Philadelphia.

“The second quarter is normally a strong quarter in terms of NOI growth,” the report noted. “The quarterly contraction reflects the impact of the COVID-19 pandemic.”

Price growth was mixed in the second quarter. “The nation, along with 14 metros, experienced property price contraction, while nine metros experienced growth and two metros had flat property prices over the quarter,” according to Freddie Mac. “Mortgage rates remained unchanged from last quarter.”

The new research comes on the heels on other data showing softness in the multifamily segment. The National Multifamily Housing Council’s latest Rent Payment Tracker, for instance, showed a drop-off of 2.4% in rent collections.