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  • Writer's pictureJeff Matlock

Apartment Forecast: What to Expect from the Multifamily Sector

Rising interest rates and expenses have caused a drastic shift in the multifamily sector, impacting what was once the hottest investment avenue on the market. Here is what I anticipate for apartment investments in 2023:

The bid ask gap needs to get smaller

We’re still seeing a gap between what buyers are willing to pay and what sellers want to get for their property, and until this difference decreases, the volume of multifamily deals will remain low. Buyers are hoping for lower purchase prices due to higher interest rates and cost of debt, but if the Fed pauses interest rate hikes, we’ll start to see deals getting done again.

Debt market stabilization could happen sooner than later

Last week the Fed raised rates by a quarter point, and while many are thinking “…not again!” this is actually a promising sign. This was the smallest percentage point increase in the last year, and Fed Chairman Jerome Powell was quoted saying that the disinflationary process has started. Once the market stabilizes, I expect to see investors jump back in feet first.

Buyers significantly outnumber sellers

Another good sign for the multifamily sector once the market stabilizes – buyers are eagerly waiting on the sideline, and there are a ton of them. Multifamily will always be a prime choice for investors, and they’ll be willing to pay a premium once interest rates return to a more reasonable level.

Operating expenses are sky-high

Add this to list of why buyers are waiting to invest right now. The cost of taxes, insurance and utilities is skyrocketing right now. For investors that already have multifamily in their portfolio, they should be working with existing tenants to limit turnover and vacancies.

Affordable housing is the darling of multifamily

Affordable housing is the only area of the multifamily sector that’s transacting at similar numbers as 2021 and the first half of 2022. New communities are being developed and existing communities are trading without negative impact from the market environment.

If you’re considering a multifamily investment in 2023, I have a wide range of options to help you find the best loan terms and rate. Get in touch with me today if you’re interested in learning more about the services I provide through Gantry.

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