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With 147 closed sales in Q4 2022, it’s safe to say we’ve finally arrived at the cliff many have been expecting for transaction volume. The quarterly decrease was 33% below Q3 2022 and a massive 46% below Q4 of 2021. The only other quarter with this level of volume in the last 10 years was Q2 of 2020, during which the market took a pause as the pandemic was fresh and uncertainty permeated the investment marketplace. The decline in transactions was certainly not a surprise as interest rates have doubled over the last 2 quarters of the year and both buyers and sellers have been slow to react to the change.


Closed sale pricing by square footage and per unit have begun to deteriorate along with sales volume. At $488 per square foot and $418,610 per unit, the market declined at a rate of 8.3% and 9.9% respectively in the quarter. Interestingly, these declines were heavily weighted towards 5 units and up commercial multi-family sales declining at a rate of 18% in price per square foot. This can easily be explained by the high sensitivity to interest rates in commercial loan underwriting. Average down payments in the 5+ unit space have risen to around 50% in the later half of the year.


Income metrics on closed sales have also shown sensitivity to rising interest rates, though not as aggressively as many had forecast. Average GRMs fell from 18.3 to 17.3 and cap rates rose by 30 basis points from 3.7% to 4.0% Although the moves are significant, they still only show a market that has retreated to Q1 2021 levels, not exactly a “crash” as some of the talking heads have declared. As of this writing, interest rates have leveled off, so it remains to be seen if values will continue to decline.


The average number of active apartment building listings in the area during Q4 2022 was 470, up only 10 from 460 in Q3 of the year. These numbers are within the same range we’ve seen over the last 10 years within a surprisingly small range of the mid 400’s. If a dramatic increase in inventory is any indication of an impending crash, like it was in 2008 at 1800 active listings, then we still don’t have the makings of a crisis in the data.

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