McLEAN, VA–Freddie Mac has released its quarterly update to the Multifamily Apartment Investment Market Index, or AIMI, and the news does not bode well for investors in these properties.
Briefly, AIMI combines multifamily rental income growth, property price growth and mortgage rates to measure investment conditions for the apartment sector. 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.
AIMI decreased in the second quarter of 2017 nationally and in 13 local markets, Freddie Mac reported. This followed a decrease in the first quarter in all markets and at the national level.
Rising Mortgage Rates
The decrease was primarily driven by a 40 basis point jump in mortgage rates.
“A substantial rise in mortgage rates over the first quarter of 2017 was the main driver of declining AIMI values in all the markets tracked, including nationally,” said Steve Guggenmos, vice president of Freddie Mac Multifamily Research and Modeling, in a prepared statement.
“Annually, AIMI has also seen declines, but largely due to increases in multifamily property prices that have outpaced the growth in rents,” Guggenmos continued.
This moderation is consistent with the GSE's outlook for the remainder of 2017. That said, Guggenmos added that Freddie Mac believes “the multifamily market will continue to be bolstered by strong demand fueled by demographic changes as well as shortages in supply in most markets.”
DC Posted An Increase
The only market to post an increase was Washington, DC, which came in at 5.5%, largely fueled by declining property prices and increasing rents.
Meanwhile, areas with high supply, such as New York City (-4.7%), San Francisco (-10.5%), Austin (-2.7%) and Houston (-0.2%), are seeing rent growth slow more than other markets.
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