Apartment Investment Environment Stays Steady

Chart courtesy of Freddie Mac

Freddie Mac, McLean, Va., said its Apartment Investment Market Index held steady in the first quarter as continuing low interest rates support the sector.

“The low rate environment and reliable net operating incomes are propelling the [multifamily] market forward,” said Steve Guggenmos, Vice President of Freddie Mac Multifamily Research & Modeling. “With a healthy level of demand and enthusiasm around the reliable asset class, growing property values continue to be the limiting factor in the index.”

The index held steady in early 2021, Freddie Mac reported. Overall, the index is down by 0.1 percent after two consecutive quarters of growth, with most markets in positive territory.

Over the quarter, AIMI declined by 0.1 percent nationwide with mixed results at the market level. Freddie Mac said 13 markets experienced quarterly growth while 11 experienced quarterly contraction. One market, Chicago, did not experience growth or contraction.

–“NOI growth was generally positive across markets,” the report said. The nation and 18 markets experienced quarterly NOI growth while NOI contracted in just seven markets. Net operating income grew the fastest in Tampa and Phoenix at 3.1 percent and 2.7 percent, respectively.

Other report findings:

–Property prices grew nationally and in 22 of the 25 markets Freddie Mac studied. New York and San Francisco continued to see declines at -2.2 percent and -1.1 percent over the quarter, respectively, while prices in Los Angeles contracted very slightly, just -0.1 percent.

–Mortgage rates decreased by 6 basis points during the first quarter.

–Over the year, AIMI increased in the nation and in 15 markets, while 10 markets experienced an AIMI drop.

–NOI decreased nationally and in 15 markets. As with last quarter, New York and San Francisco posted double-digit year-over-year NOI declines (-16.5 percent and -21.7 percent, respectively), which the report called “very rare” for any market on an annual basis. Ten markets posted annual NOI gains.

–The nation and 16 markets experienced property price growth, while eight metros saw contraction. Chicago was the only metro with no property price growth or contraction over the year. –Mortgage rates decreased by 42 basis points compared to a year ago. “This is a large drop, but not as severe as the annual rate drop in each of the last six quarters,” Freddie Mac said.