SoCal Multifamily Sales Pulse - January 23, 2022 - January 29, 2022

• 31 January 2022
• Mike Lembeck

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Here's What's Happening In The Market, Here’s What This Means For You

10 Economic Indicators to Watch as Omicron Fades 

With many calling for COVID-19 to be treated as endemic, we’re optimistic that the disruption we’ve seen in markets across the world will further abate in 2022.

1. The pandemic. Rising vaccination and booster rates, combined with a more transmissible and less severe strain, may allow the pandemic to shift toward endemic in 2022.

2. Global supply chain. Supply chain pressures will ease as the pandemic recedes.

3. Inflation inflection. Although current CPI inflation is running hot, current high rates are not expected to persist into the medium-term, limiting pressure on long-term rates.

4. GDP growth. Much of the strong economic growth being projected assumes the consumer is ready to unleash pent-up demand that has been accumulating throughout the pandemic.

5. Industrial supply. Industrial demand boom to continue and construction deliveries to surge in 2022.

6. Multifamily household formation. Home prices and rents exist in equilibrium. Watch for home price growth to slow down generally (it’s already begun) while rent growth persists and accelerates in lagging markets.

7. Investor diversification. Investors should be on the watch for a partial normalization of market activity.

8. Sustainability shifting to the forefront. Stranded assets’–we will start to see buildings that do not meet ESG (Environmental, Social, and Governance) requirements of investors or occupiers. The cost to retrofit some buildings will be too high to deliver value.

9. Confidence in the office market. Occupiers to lock in favorable terms for the long-term before office fundamentals recover.

10. Retail rebounding. Although the initial impact of stimulus is behind us, households accumulated savings during the last two years to further support retail growth in 2022.

The Pulse of the Market

As expected listing inventory has seen a very slight increase since the end of last year. Well-priced and desirable properties are still selling quickly and with multiple offers - sometimes at full price or over the asking price. The Average Days on Market in most areas is still low – averaging around 30-45 days.

What to Expect:
We should see inventory continue to increase throughout the first half of 2022, although I’m not expecting a huge increase. The demand is just too strong from investors, and vacancy factors are still low. The big question is evictions and how long it will take the courts to get through the backlog of cases. With some eviction protections still in place, these protections could extend the problem longer. Buyers don’t want to purchase a building that has tenants that aren’t paying, and you can’t blame them.

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