Freddie Mac Multifamily Investment Index Drops

The Freddie Mac Multifamily Apartment Investment Market Index fell by 7.6% in the fourth quarter, and by 25.8% year over year.

Steve Guggenmos, Vice President of Research & Modeling at Freddie Mac Multifamily, noted the index decreased nationwide and in all 25 markets studied on both a quarterly and annual basis, driven primarily by rising mortgage interest rates. The nation and 22 markets experienced their sharpest annual AIMI decline in the history of the index, he said.

“The extraordinary increase in mortgage rates drove the decline in AIMI as 2022 concluded,” Guggenmos said. “Rising rates and slowing property cash flows impacted investment conditions, despite the fact that multifamily fundamentals that drive property cash flows are not expected to weaken significantly.”

Over the quarter, the index decreased in the nation and in all 25 markets, driven primarily by higher mortgage rates.

•             Net operating income contracted in the nation and in every market except for Miami. “NOI change is negative for most fourth quarters, so this result is not atypical,” the report said.

•             Property prices dropped in the nation and in every market except Tampa, Fla. “Contractions were larger than normal this quarter; the nation experienced its largest drop since 2009, as did all but five metros,” the report said.

•             Mortgage rates increased by 100 basis points during the quarter, the largest quarterly increase in the entire history of AIMI going back to 2000.

Over the year, AIMI decreased in the nation and in all 25 markets examined, driven by the large increase in mortgage rates. The nation and 22 metros experienced the largest annual AIMI percentage decline since the series started in 2000, Freddie Mac reported.

•             NOI growth was generally strong with a 6.3% national growth rate. NOI declined in two markets, Las Vegas and Phoenix, and exceeded 10% in three markets, Miami, New York and San Diego.

•             Property price performance was mixed but generally positive. The nation and 18 markets experienced price growth whereas prices declined in seven markets.

•             Mortgage rates increased by 282 basis points, by far the largest annual increase in the entire history of the index.