ShareReady for some good news about multifamily investment opportunities? Freddie Mac reported its Multifamily Apartment Investment Market Index rose by 8.7% in Q1 2024 and over the full year, with the annual index up 8.1% from Q1 2023. The quarterly increase took place nationwide and in all 25 regional markets, signaling a “sharp reversal from the decline last quarter.”
The AIMI combines multifamily rental income growth, property price growth, and mortgage rates to provide a single index that measures multifamily market investment conditions.
“A decline in property prices and interest rates contributed to the AIMI’s strong start in the first quarter of the year,” said Sara Hoffmann, director of multifamily research at Freddie Mac, in a statement.
Index Highlights
AIMI data for the quarter shows:
- Net operating income performance was mixed. The nation and five metros saw essentially no growth. Five other metros recorded NOI growth of at least 1%, and four recorded NOI contraction of –1% or less.
- Property prices dropped in the nation and in all markets, with declines ranging from –0.4% in Chicago to –3.8% in Denver.
- Mortgage rates fell by 56 basis points. That was the largest decrease since Q3 2010.
Year-over-year data shows:
- NOI results were mixed. Eleven markets, plus the nation, experienced growth, while 14 markets experienced declining NOI.
- Property prices declined in the nation and in all markets. Ten markets contracted by more than –10%.
- Mortgage rates increased by 246 basis points. This was the second highest annual increase in the entire history of AIMI, going back to 2000.
“We expect deal volume will stabilize further
now that the worst of inflation is behind us, and
the Fed appears to be done hiking rates.”
-CBRE's "Chart of the Week," June 28, indicating deal volume may pick up cautiously in early 2025
Past Loans Still Carry Risk
While some indicators are shifting positively, multifamily investors should proceed with caution as commercial mortgage delinquencies are on the rise overall. According to the most recent Trepp analysis of Federal Reserve data, 1.7% of multifamily loans are at least 30 days delinquent, compared with approximately 7% of office loans and 6% of hotel and retail loans.
Debt concerns are more concentrated in the Sun Belt due to its high building volume. Trepp projects that a total of $602.6 billion in commercial mortgage loans, including multifamily, will be coming due this year.
View the latest Multifamily Apartment Investment Market Index