It’s here, it’s here–the June issue of The Apartment Advisor, from Dupre + Scott! This issue was all about investments in the first five months of 2013; let’s see how it compares to 2012 and years past.These are just some of the most salient points from the new issue; as always, check out DupreScott.com for the comprehensive report.
Multifamily sales are currently up over this time last year–but projected sales for the year won’t outperform 2012.
In the first five months of 2012, $645 million in 5-unit or larger apartment buildings sold. Now skip ahead to the first five months of this year, when that number jumped to just under $900 million. When we annualize that number, it puts this year’s total sales activity at about $2.1 billion; in 2012, that number hit $2.7 billion. According to Dupre + Scott, “we don’t expect 2013 o outperform last year,” because 2012 sales were buoyed by capital gains tax changes.
Prices on these buildings are continuing their three-year rise.
So what are these 5-unit or larger buildings selling for, anyway? According to the Advisor, they’re currently averaging $141,389 per unit, up from $136,555 per unit averaged over 2012. That puts the price 3.5% up from last year’s average, which means prices are continuing on their three-year rising streak. Higher rents and lower mortgage rates are fueling the increase.
Cap rates have climbed above interest rates, signifying investors’ “concern about the potential for interest rates to climb in the future.”
Let’s back up a little–the relationship between cap rates and interest rates can be complex. According to Dupre + Scott, cap rates rise and drop due to many reasons, including supply and demand, changes in the cost of capital, and changes in buying pressure. Lately, cap rates have climbed much higher than interest rates. “Investors are taking advantage of today’s low rates, but [the difference] suggests they are concerned about the potential for interest rates to climb in the future.” Incidentally, this is a good place to note that assessed values, which fell over the past few years, are finally starting to catch up with price trends.
…Finally, some quick stats from the report
We’ve bulleted some statistics from the 5-19 unit sale findings below. For numbers on 20-99 and 100+ unit sales, as well as breakdowns by county, check out the latest Apartment Advisor.
Tri-County 5-19 Unit Sales
- $91 million (in 74 sales) of these buildings have sold thus far this year; that’s up from $75 million (in 65 sales) at this time last year.
- Average price is $134,023 per unit, up from $130,491 last year (a 2.7% jump).
- Cap rates on these buildings have remained steady at 5.6%, up from their 4.6% low in 2007.
- Averaged assessed value on these sales in 2013 is 88% of the sale price, down from 91% of the sale price in 2012.