Only two multifamily assets traded in Q2 2024 with a total sales volume of $6,155,048.
The largest sale of the quarter was Royal Oak Apartments (33 units) that sold for $5,355,048 ($167,345 per unit), cap rate not given. Apartment vacancies remain relatively low for Q2. Johnson Perkins-Griffin reported that the overall vacancy rate decreased to 2.54% (-41 basis points) while average rents increased from $1,639 in Q1 to $1,660 in Q2.
On the transactional side, very few deals are trading, mostly due to low inventory and the capital markets. Given the cap rate environment for on-market properties, which is averaging in the 5.00% to 5.25% range, making deals pencil remains a challenge. The good news is that there is still liquidity in the market and 1031 trade buyers are still out there. So far, talking with several lenders, we do not see any distressed multifamily assets yet this year; however, according to at least one source, we expect some multifamily defaults to start in 2025.
For new development, there are currently 2,951 units under construction after 699 units were delivered in Q2 2024. As for Planned Projects, just over 6,600 units are planned, and several are either pending, on hold due to financing or pricing, or for sale.
Federal Reserve Chair Jerome Powell said on Wednesday interest rates could be cut as soon as September if the U.S. economy follows its expected path, putting the central bank near the end of a more than two-year battle against inflation but square in the middle of the nation’s presidential election campaign. The Fed ended its latest two-day policy meeting with a decision to hold its benchmark interest rate steady in the 5.25% – 5.50% range that was set a year ago, but its statement softened the description of inflation and said the risks to employment were now on a par with those of rising prices – neutral language that opens the door for rates to fall after more than two years of tightening credit.
We will wait to see what happens this fall with interest rate adjustments, if any. Notwithstanding, the economy remains robust in northern Nevada and as a result, we will continue to see buyer interest. We may have to adjust to a “new normal” with interest rates only expected to come down marginally this year.
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