Some signs have suggested negative pressures on transaction sale prices in CRE, especially in multifamily, according to MSCI Real Assets data. What might have been a one-time quirk in April could be extending into May.
The multifamily price index dropped 1.5% from March to April and 12.1% over the past year. The second derivative — the rate at which price changes alter over time — has fallen sharply since property prices peaked in 2022. The current slide resembles the patterns seen during the 2008 Great Recession, though this time, year-over-year price changes are dropping from a higher starting point. Multifamily had the biggest drop.
Now switch metrics from sale prices to dollar sale volumes. MSCI shared data for May with Multifamily Dive. It fell 18% year over year to a total of $8.2 billion in May. Before that, sales volume had grown at double-digit rates for 11 consecutive months before May.
There are two ways dollar sales volume can fall. One is fewer transactions. The other is for prices to drop. Or there could be a combination of the two. The RCA commercial property indexes in May dropped 1.1% year over year.
Sales volume was up 3% in mid- and high-rise properties. Garden sales, however, were down 30%. Single-property sales were down 17%; portfolio and entity-level sales were down 23%.
It is difficult to discern clear implications, in large part because trends in different metrics and data from various sources can amplify or counter one another. For example, the multifamily market has seen uneven rent growth as new deliveries have peaked. Multifamily rents have seen an ongoing modest decline for 23 straight months, according to Markerr.
“Typically, this period shows stronger seasonal rent growth, but it has failed to buck the negative trend despite the easy comps,” Markerr’s report read.
Another complication is multifamily completions. At historically high levels through 2024, the growth of inventory has helped restrain and even push down rents. Last month, Yardi Matrix forecasted a drop in construction but an increase in completions for 2025 and 2026, with numbers revised by 3.3% and 11.5%, respectively.
RealPage stated that multifamily permitting and starts may have reached a bottom in the construction cycle, based on permit and housing survey data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
It’s likely to take at least a few more months of data, despite some turbulence, to see how all the data come together and what directions they offer.
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