LOS ANGELES—With interest rates anticipated to increase this year, multifamily buyers and sellers are rushing to close deals. Both buyers and sellers of multifamily product are feeling the pressure to act before interest rates rise, with sellers looking to get top pricing and buyers looking to secure cheap capital. As a result, market experts expect owners to bring new opportunities to market this year.
“As interest rates begin to climb, as they are certain to do, we will see more properties come on the market in the next 12 to 18 months,” Reza Ghobadi, SVP at Colliers International and an expert in the San Fernando Valley and Tri-Cities markets, tells GlobeSt.com. “Sellers will soon realize that the time for record-low cap rates is ending as interest rates climb and they will want to maximize their profits before that happens. Buyers are going to try to lock in relatively low interest rate financing now before interest rates go higher.”
While interest rates will likely encourage more sales, the Los Angeles multifamily market generally has strong dynamics that continue to drive activity. “In my opinion, in the multifamily investment market, we are seeing strong fundamentals: strong job market, low supply of multifamily investment properties, and a historically low vacancy rate for apartments due to the high-barriers to homeownership put in place after The Great Recession, especially among fist-time homebuyers,” says Ghobadi.
While the market remains strong and will likely continue to be active due to the extreme supply-demand in Los Angeles, there is some concern that foreign investors will slow activity in US markets. “There also is the beginning of some uncertainty about the demand from foreign investors, although traditionally, greater L.A. has always been a favored location for foreign investors,” says Ghobadi. “In my opinion, a recession in late 2019-2020 is likely, but nothing on the scale of the 2008 recession and for a far shorter period. It will be more of a market correction than anything else.”
LOS ANGELES—With interest rates anticipated to increase this year, multifamily buyers and sellers are rushing to close deals. Both buyers and sellers of multifamily product are feeling the pressure to act before interest rates rise, with sellers looking to get top pricing and buyers looking to secure cheap capital. As a result, market experts expect owners to bring new opportunities to market this year.
“As interest rates begin to climb, as they are certain to do, we will see more properties come on the market in the next 12 to 18 months,” Reza Ghobadi, SVP at Colliers International and an expert in the San Fernando Valley and Tri-Cities markets, tells GlobeSt.com. “Sellers will soon realize that the time for record-low cap rates is ending as interest rates climb and they will want to maximize their profits before that happens. Buyers are going to try to lock in relatively low interest rate financing now before interest rates go higher.”
While interest rates will likely encourage more sales, the Los Angeles multifamily market generally has strong dynamics that continue to drive activity. “In my opinion, in the multifamily investment market, we are seeing strong fundamentals: strong job market, low supply of multifamily investment properties, and a historically low vacancy rate for apartments due to the high-barriers to homeownership put in place after The Great Recession, especially among fist-time homebuyers,” says Ghobadi.
While the market remains strong and will likely continue to be active due to the extreme supply-demand in Los Angeles, there is some concern that foreign investors will slow activity in US markets. “There also is the beginning of some uncertainty about the demand from foreign investors, although traditionally, greater L.A. has always been a favored location for foreign investors,” says Ghobadi. “In my opinion, a recession in late 2019-2020 is likely, but nothing on the scale of the 2008 recession and for a far shorter period. It will be more of a market correction than anything else.”
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