Multifamily Investment Conditions Mixed as Market Works to Stabilize
Freddie Mac’s Multifamily Apartment Investment Market Index rose 0.3% nationwide during the second quarter.
Quarter two multifamily apartment investment conditions were mixed across the country with 14 markets up, nine markets down and two unchanged in Freddie Mac’s Multifamily Apartment Investment Market Index (AIMI). The index rose 0.3% nationwide quarter-over-quarter and 2.2% year-over-year.
The results are consistent with a market working toward stabilization after significant volatility, said Sara Hoffmann, senior director of multifamily research at Freddie Mac.
“While higher mortgage rates compared with last quarter increased the cost of financing, this was offset by lower property prices and modest rental income growth,” she said.
Net operating income (NOI) was mostly positive quarter-over-quarter, with the nation and 19 metros experiencing growth while two metros declined and four were flat. For the year, the figure was up nationally but lower in 14 markets. Washington, D.C., was the best annual performer with an NOI increase of 4.4% and Jacksonville ranked lowest with an NOI decrease of 6.5%.
Across the country and in the majority of markets, prices dropped over the quarter, according to Freddie Mac. Just four markets saw growth in prices, led by Boston with growth of 0.6%. Prices declined in all markets year-over-year, with the nation showing a decrease of 8.3% and 11 markets contracting more than 10%.
Mortgage rates increased 21 basis points during the second quarter, which was a sharp reversal from the previous quarter when rates dropped by 56 basis points, said Freddie Mac. For the year, mortgage rates increased by 64 basis points, which is a smaller increase than in 2022 and 2023.
AIMI is an analytical tool that combines multifamily rental income growth, property price growth and mortgage rates to provide a single index that measures market investment conditions. 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 with the prior period.