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While Q1 of 2023 saw the lowest transaction count in our local area in more than 10 years, Q1 2024 could be showing us what might be later recognized as the green shoots hinting at a path out of the market’s limbo. At 167 total transactions, volume didn’t exactly surprise to the upside, but grew at 30% over 2023 and showed a transaction level only about 26-28% below the extremely busy first quarters of 2021 and 2022. Anecdotally, our agents have also been much busier and the expectation gap between buyers and sellers seems to be converging to allow more deals to come together.


With an average price per square foot of $472, pricing has continued to deteriorate, albeit at a measured pace. Closed prices were down 3.8% from last quarter and 11.2% from the height of mid-2022. Price per door for the quarter clocked in at $400,711, a 6.7% decline from last quarter and a 13.7% drop from the high in 2022. Are we in a downturn? Yes. Crisis/crash/meltdown/pick-your-fear-mongering-headline? Not exactly. That said, there’s nuance in the numbers. While pricing and volume for smaller 2-4 unit properties have held up surprisingly well, pricing for 5+ unit properties subject to commercial financing has felt more pressure. These larger properties currently experiencing a rolling reset cycle in their debt are down 16.5% and 14.5% on price per square foot and price per door respectively.


Income metrics continue to slide in a slow capitulation to now nearly 2 years of higher interest rates.  Closed sale rent multiples (GRM) averaged 15.6 times gross annual rents while cap rates rose to 4.6% on average.  These are the lowest levels we’ve seen since early 2016 for GRM and 2015 for cap rates.  It’s a testament to the power of inflation in real estate that although we’re at nearly a 10 year low for income metrics, the physical valuation stats on properties examined above show a retreat only to levels we saw as recently as early 2021.  As with previous recent quarters, there remains a huge spread between the 2-4 unit properties and 5+ unit properties in income metrics worth three full multiples on gross rents and 60 basis points on cap rates.


Active listing counts for multifamily properties in the Greater South Bay remained higher than the super low levels of the last decade, but consistent yet drifting higher to what we saw in 2023. At an average inventory level of 551, we are seeing the scales of the buyer/seller power dynamic tilt toward buyers’ favor for the first time since emerging from the great financial crisis over 10 years ago. Inventory levels are at their highest level since 2012, although still considerably below the historical market prior to the GFC. There’s also a wide disparity between smaller starter properties and larger, more expensive or commercial listings.

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