Approaching a good time to buy multi-family property? ..... Apartment-Building Sales Drop 74%, the Most in 14 Years

March 2, 2023 Bisnow reports
“Multifamily Investment Sales Plunge 71% In January”
Link 1 below

April 4, 2023 Wall Street Journal, Forbes CNBC and others report
“Apartment-Building Sales Drop 74%, the Most in 14 Years”
Link 2 below

I have no doubt each story focuses on large apartment buildings and large suburban apartment complexes. But I have to imagine there is a similar trend in smaller multi-family buildings.


LInk 2

Blackstone on vacation?

Stories about groups like blackstone “buying up all the properties” are often overstated and almost 100% of them come from political activists (not from industry analysts.)

Either way, the owners of recently-acquired large multifamily properties are probably in a lot of trouble. (They often have unfavorable mortgages for the first 5-7 years.) In fact, if this trend continues, then anyone who acquired large multifamily properties int h past few years absolutely will be in deep doo doo.

This article doesn’t break out big national investors from local and smaller investors, but it certainly shows the huge affect of investment purchasers.
And there may be advantages to investor purchases in restoring old neighborhoods.
But it certainly drives up home values, which are becoming out of reach for many first time buyers.

In late 2008 the Fed began buying mortgages. Whether or not one thinks that was a good idea probably depends one how much of a free market devotee one is.

But certainly by 2015, or 2020 or so it was no longer a good idea, yet the Fed continued. It also continued as home-prices began to spike and a bubble was forming.

When the Fed prints money in a generic way, it expands the economy in a generic way and causes generic inflation. The Fed did not do (only) that. By specifically buying MBS the Fed ensured that the bubble occurred specifically in the housing market.

The free market said

“Home prices are spiraling out of control. We are not going to buy these mortgages. Banks will therefore stop making them.”

The Fed responded

"Then we will. Instead of our normal money-printing operations we will specifically target it to buy MBS. We don’t care how high housing has gone. We will pump more air into the balloon."

(This is always a risk when one central authority decides how many blue jeans to make or how many mortgages to buy.)

Fed buying does not distinguish between small buyers and big buyers. When small buyers ran out of cash (or buying motivation) the Fed simply bought up the mortgages from big buyers that the free market had refused to touch.

Whether the buyer was concentrated in Blackrock, or in 1,000 different commercial buyers the free market refused to finance that madness (stopped buying the mortgages.) The Fed stepped in Soviet style and bought up the mortgages the free market would not touch.

The Fed currently owns 30% of all MBS in America most of those are recent so, could be as much as 60% of the mortgages made as the prices spiraled upward.

Your article refers to Dallas FW where there is is certainly no supply shortage.

More like gold-rush, tulip-boom, housing-boom sorta thing.

95-Unit building in Turtle Bay in New York sold for a 90% discount.

Traded at $69M in 2014
Valued at $125M in 2016
Traded at $13M in 2023

Right near the Chrysler building.
Not far from Grand Central

If they recently acquired them, they would likely not be turning around and selling them. The articles are focusing on sales. But if the recently-acquired properties have good occupancy rates and rent levels that support the balance sheets, that’s not a recipe for trouble. And good investors usually buy such properties based on the cash flow at the time of the purchase.

Rents will only go up. Even if the property values drop, the cash flow will still be there. (In theory, anyway.)

But to your question in the thread title, owners who are committed to selling will likely have to lower prices to attract buyers. Even with higher interest rates, there are likely some good cash flow bargains out there in the current market.