SoCal Multifamily Sales Pulse - September 18, 2022 - September 24, 2022

• 26 September 2022
• Mike Lembeck

Disclaimer: All information contained herein is obtained from sources believed reliable. We have not verified it and make no guarantee, warranty or representation about it. Any projections, opinions, assumptions or estimates used are for example only. We make no claim(s) as to the accuracy or reliability of the information presented. If you wish for us to analyze your specific property or situation please feel free to call or email us anytime.

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

The votes are in: Delinquent listings fuel California’s MLS inventory. https://journal.firsttuesday.us/the-votes-are-in-delinquent-listings-fuel-californias-mls-inventory/86101/

The home price correction is sharper—and more widespread—than previously thought. A growing chorus of research firms, including Moody’s and Zonda, expect the correction to continue into 2023.

Multifamily Buyers Will Have Outsized Opportunities in 2023. It has outperformed other asset classes from a yield perspective, and as the costs of homeownership continue to be staggeringly out of reach for many would-be buyers, demand drivers remain strong.

As mortgage rates rise, the affordability gap widens, increasing the barriers of entry for home buyers and subsequently pushing them towards renting. This shift will provide a strong rental market allowing rental rate growth to outpace inflation.

Housing Bubble Woes: Home Builders Cut Prices, Pile on Incentives, amid Plunging Traffic of Buyers, Spiking Cancellations, Holy-Moly Mortgage Rates.

Significantly Higher Mortgage Rates Are Preventing A Massive Number Of Homeowners From Selling Their Homes, And The Trend Has Grown More Problematic Recently.

The historic low rates of 2021 — some as low as 2.25% — caused what economists call “the locked-in effect,” meaning owners with low rates are likely to stay put rather than move for years to come.

Fed chair Powell says "housing market has to go through a correction" and calls that "a good thing," citing the need for more balance between supply and demand. Says affordability needs to be restored.

The Federal Reserve on Wednesday raised its benchmark interest rate by 75 basis points for the third straight month as it tries to bring scorching-hot inflation under control, a move that threatens to slow U.S. economic growth and exacerbate financial pain for millions of households and businesses.

The average American has lost $4,200 in annual income since President Biden took office — entirely wiping out gains made under the Trump administration.

Most experts point out that the multifamily sector continues robust at this juncture. The market has been very strong, and rents have kept up with inflation in many markets, even at the elevated levels of current inflation.

The Pulse of the Market

We’ve seen an increase in inventory since the start of the year as most of Southern California has seen multifamily inventory levels up by 30-50% since January. Even with inventory levels up, the number of monthly sales is still at about the same level as they were in January. Investors who took advantage of the low-interest rates and bought property over the last 2-3 years aren’t going to be in a hurry to sell and exchange out of those properties and into a new loan at a higher rate. We’re seeing fewer Pending Sales each week. Now’s the time for buyers to CREATE good deals by negotiating with more flexible sellers.

What To Expect

With interest rates almost twice as high as they were earlier this year (see Apartments 5 units+ 1st TD  https://socalmultifamilybroker.com/rates) more interest rate increases potentially coming over the next few months and the holidays approaching, I don’t see much to indicate any significant change in the market. If anything, there will be continued slowing. The end of each year usually provides some buying opportunities due to investors wanting to close escrow before the end of the year. If you’re selling, let me know if you’re interested in an analysis of your property or as a buyer interested in buying one of these potential deals.

Make sure you catch next week’s video where I’ll be reviewing the monthly stats from September that will give us a fresh look at the listing and sale trends we’re seeing since the recent interest rate increases started. As always, feel free to give me a call or send me an email with any questions on the market. All right, that’s it for now. I hope something good happens to you today. See ya next week.

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