Yardi Matrix: Multifamily Appreciation–Like Rents–Could Flatten

Like multifamily rents, the capital markets have cooled, reported Yardi Matrix, Scottsdale, Ariz. 

This cooling could be a signal that capital indicators will slow or flatten rather than turn negative, the company’s Fall Multifamily Outlook said.

Multifamily property performance remains “robust,” Yardi Matrix said. “The sector provides investors with high income compared to bonds, and the U.S. is considered a safe haven compared to Asia, Europe or emerging markets.” The research firm maintained a favorable outlook for the sector.

“[But] while we are optimistic about fundamentals, we do expect that the appreciation gains–much like rents–are due to flatten,” Yardi Matrix said, noting that apartment property prices have gained 134 percent since the late 2009/early 2010 trough. 

Debt markets remain stable for multifamily properties, Yardi Matrix reported. The Mortgage Bankers Association reported Tuesday that multifamily mortgage debt outstanding rose by 2.6 percent to $1.09 trillion. 

“Fannie Mae and Freddie Mac continue to grow to record levels, not only because the allocation for core products is rising but because the government-sponsored enterprises are also expanding into products such as small-balance apartments and properties that are increasing their sustainable measures,” Yardi Matrix said.

But future apartment property deliveries will likely start to slow. Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., examined HUD and Census Bureau figures released this week and noted that apartment construction remains strong throughout much of the country “but the pipeline of new projects is no longer growing.”

HUD and the Census Bureau reported that authorizations of units in buildings with five units or more fell by 8.4 percent between July and August to 370,000. And five-plus unit multifamily properties authorized but not yet started fell from 80,000 units in August 2015 to 59,000 in August 2016–a 26.3 percent drop year-over-year.