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With 257 closed transactions in the second quarter of the year, sales volume has remained in a normal range for this time of year.  Although 23% lower than 2021 Q2, the count is more typical of what we’ve seen in previous pre-pandemic years.  So far, the impact of increasing interest rates has not measurably reduced transaction volume.  This will be an important metric to track as the months of rate increases start to wear on.


Pricing was dead flat on a per square foot basis from Q1 of this year through Q2, a welcome reprieve for a blistering hot pace of increases over the last few years.  Rising interest rates are likely to blame for the plateau in demand, and we expect pricing to remain relatively flat for the foreseeable future while the economy and capital markets digest our new rate environment.  Still, even if prices remain totally flat for the full year of 2022, we’d be looking at an 8.6% appreciation in the market vs. 2021.


Despite insistence by many that cap rates would move in lockstep with interest rate increases, that dynamic has yet to materialize in our market.  Cap rates remained totally flat at 3.6% and average GRMs went to 18.8 down from 19.0, not really a statistically significant move.  Demand for multi-family assets has remained strong as leasing fundamentals, supply shortages, and affordability challenges for homeowners has continued to bolster renter demand.  Even 2-4 unit property sale metrics remained flat despite interest rates for purchase loans topping 6% this quarter.


An excellent leading indicator of changes in the market, inventory levels are important to watch.  Again, despite expectations to the contrary, inventory has remained at super low levels even in this rising rate environment.  Although demand is clearly impacted by increased rates, an argument can be made that sellers are also discouraged from listing and completing exchanges into upleg properties with higher rates than a current portfolio, further constraining supply.  There’s certainly no distress in the market these days either, so we have no expectations of foreclosure inventory or quick bargain sales.

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