News
Bargains Coax Investors Off Sidelines – Dave Mikkelsen interviewed
Woodland Hills, CA – November 4, 2024 – The multifamily real estate market is showing signs of recovery after a challenging period marked by rising interest rates. In Q2 2024, investment volume surged to $38.8 billion, an 82% increase from the previous quarter and 19% year-over-year, largely driven by major transactions like Blackstone’s $10 billion acquisition of AIR Communities. Despite a dip in Q3 to $35.8 billion due to fewer large deals, transaction volume still grew 9% year-over-year.
Analysts attribute the revitalization to improving market conditions, with below-replacement-cost opportunities enticing investors back. Although the rise in the 10-year Treasury yield has introduced some caution, experts remain optimistic about the sector’s future, citing robust demand, low vacancy rates (around 5.5%), and positive rent growth potential.
While overall transaction volume remains significantly below its 2021 peak—down 60-70%—the fundamentals are stabilizing. Investors are now underwriting with more confidence, and market indicators suggest a tightening supply of new units due to stalled construction, which may lead to greater rent increases in the coming months.
“Opportunistic buyers are looking to purchase distressed assets at a discount, but there are less distressed sales than we expected,” IMG’s Director of Investor Relations David Mikkelsen noted, emphasizing that owners are enduring the market correction with the expectation of improved outcomes ahead.
Although high borrowing costs continue to pressure multifamily values and increase cap rates, there is evidence of a potential turnaround. Many buyers, including institutional investors, are returning to the market, motivated by attractive discounts and favorable fundamentals. Overall, experts predict a marked increase in capital participation and investment activity in the multifamily sector as market conditions improve.
Read the full article by Patricia Kirk at Multi-Housing News online