Apartment Investment Slips in Fourth Quarter

Freddie Mac said its Apartment Investment Market Index slipped in the fourth quarter but finished 2020 with strong annual growth.

The GSE’s apartment investment index saw a modest 1.4 percent decline in the fourth quarter as mortgage rates remained fairly stable and property net operating incomes were negative. But the annual growth figure rose to 11.5 percent–the largest increase since 2010.

Freddie Mac Multifamily Vice President of Research and Modeling Steve Guggenmos noted the index’s annual growth indicates it may be easier to find attractive investment opportunities compared with the prior year.

Steve Guggenmos

Guggenmos largely attributed the annual growth figure to mortgage rates, which saw their largest annual decline in recent history, 96 basis points.

“AIMI experienced impressive growth over the course of the year due to the significant rate drop and strong annual net operating income growth indicating a strong market for investors,” said Guggenmos. “Despite the quarterly decline in AIMI due to a seasonal contraction of net operating income coupled with property price appreciation, the index continues to reflect strong demand for multifamily investments.”

The AIMI decreased nationally and in 10 markets during the quarter. Only three markets, Boston, New York and Philadelphia, saw a quarterly increase.

Freddie Mac also reported:
–Fourth-quarter NOI growth was negative in the nation and in every metro except Phoenix, which saw healthy growth. “NOI performance is typically worst in the fourth quarter, so the result is not surprising,” Guggenmos said.

–Property prices grew nationally and in 10 markets during the quarter. Boston and New York saw declines of -1.8 percent and -1.6 percent, respectively, while Philadelphia remained essentially flat.

–Mortgage rates remained relatively stable during the quarter, only moving seven basis points.

Over the course of the year, AIMI increased significantly in the nation and in every metro. Only four metros did not see 10 percent-plus gains, and Philadelphia reached 20 percent growth. Each metro except Atlanta, Chicago and Orlando experienced its largest annual AIMI increase since 2010.

–For the year, NOI growth ranged from 1.8 percent in New York to 10.6 percent in Phoenix.

–Property prices grew nationally and in all but three metros (New York, Philadelphia and Houston). As with NOI growth, Phoenix was the only metro to surpass 10 percent. It saw 13.8 percent growth.