Three Reasons To Feel Positively About Multifamily Real Estate Right Now

Transactions Are Growing

Transaction volume has been sluggish for several years, but there are signs of light at the end of the tunnel. The Newmark report found that transactions were up by 20.4%, representing the first positive change since the second quarter of 2022. Los Angeles and Dallas led the way in sales volume, with the Southwest and Southeast representing 45.8% of all sales volume.

Dry powder is going down as deals get done, and available capital is down 10.3% since its peak in December 2022. Fundraising was up by 31% and more funds are raising capital than in recent months.

Expenses Might Be Slowing Their Pace Of Increase

Multifamily owners have had to deal with rising costs over the last few quarters, but there seems to be some relief coming, albeit slowly. Expenses were up 5.1% in the quarter, but the pace of increase is trending downward. The biggest concern for many operators right now is insurance. Since the pandemic, insurance has been a larger part of the total expenses. Prices are rising in that area but are coming down from recent peaks.

The lending climate is a shadow over the future of multifamily. Loan originations are still down, but deals are being made and some lenders are noticing an increase in multifamily lending. The report noted that regional banks must reduce commercial real estate debt exposure. Newmark forecasts this will play out over the next several years as $669 billion in multifamily loans mature between now and 2026.

Over the long term, multifamily tends to be a very resilient sector. The number of loans in distress does represent a material concern, but it also creates a climate where more transactions may occur. Over the long term, issues around housing affordability and the more transient nature of much of the workforce should keep multifamily demand strong in most markets.

You Don't Have To Be A Direct Investor To Profit From Real Estate

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields and you don't have to be a landlord to do it. Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider.