Multifamily Investing Conditions Remain Steady

January 2, 2018

Multifamily investing conditions were steady in the third quarter according to Freddie Mac.  Nationally, Freddie Mac’s Multifamily Apartment Investment Market Index (AIMI)* was flat.  However, 11 of the 13 markets that AIMI tracks showed stronger conditions.  Slight NOI growth, property price growth, and most importantly, lower mortgage rates drove a slight increase in the AIMI index.

In the third quarter, net operating income (NOI) growth drove increases in most markets except for Chicago, Washington DC, and Seattle. Property price growth was positive in all markets except Chicago and Philadelphia.  The largest driver to the improved AIMI index was lower mortgage rates.

On an annual basis, AIMI shows a decline for 2017 to the third quarter.  NOI grew in 12 of 13 markets.  Property prices also grew in 11 of 13 markets.  However, the price increases were slower than the pre-recession average price increases.  And a year-over-year increase in mortgage rates of approximately 24 basis points drove the overall decrease in the AIMI index.

* AIMI is an analytical tool developed by Freddie Mac that combines multifamily rental income growth, property price growth and mortgage rates to provide a single index that measures multifamily 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 to the prior period.

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