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Strong First Quarter for Multifamily Sector

Posted On June 7, 2013

We at BBG expect a solid performance from the multifamily sector through 2013. The May Market Trends report with first-quarter data from the National Multi Housing Council (NMHC) shows we are on the right track, although the number of permits relative to new construction starts may mean that first-quarter start levels will not be sustained and a slowdown could occur. On the whole, though, BBG remains optimistic about the multifamily sector.

Some highlights:

  • Nationally, apartment vacancy rates remained virtually unchanged from 8.8 percent to 8.7 percent, according to the U.S. Census Bureau statistics. The MPF Research national vacancy rate for investment-grade apartments is the same as this time last year, at 5.1 percent.
  • Multifamily building starts and completions increased while permits dipped for the first time since the third quarter of 2011. Starts rose 9.8 percent to their highest level since 1Q 2004 and 50.6 percent higher than one year ago. Permits decreased slightly (0.6 percent) from the previous quarter but are still up 27 percent from a year ago.
  • Starts outnumber permits for the quarter by 30,000,
  • Completions increased slightly – 0.8 percent from last year and up from 20.4 percent from a year ago.
  • Sales volume increased in the apartment transaction market to its highest level since 4Q 2007, to $31.7 billion, according to Real Capital Analytics. Transaction volume was up 10.7 percent from the previous quarter. Apartment prices decreased 8.6 percent to an average of $111,265 per unit, but they were still up 4.8 percent from a year ago.
  • Loan credit quality looks good as delinquency rates and default rates on multifamily loans continue to decline for most lending institutions.

NMHC members can read the full report here.

Our synopsis looks at national data. Of course, commercial real estate trends and performance vary by location. BBG has offices and satellite offices from coast to coast, staffed by regional market experts.

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