Recent Updates in the Market
Multi-family rentals have increased by 2% annually in the previous three decades. During the following ten years, they had a 3% growth. Their growth rate grew by 12% in the last year, six times more than the 30-year average. Given these figures, multi-family occupancy should be declining; yet, last month had the highest occupancy in multi-family history, with 97.3% of all units filled. We are now seeing the highest rent growth and occupancy rates in history.
In another story, capitalization rates in the United States are compressing at a pace never seen before, although we have been experiencing cap rate compression for the last ten years. We know that lower cap rates indicate higher prices, so we want cap rates to decrease. They’ve been falling fairly steadily over the previous decade, but they’ve been dropping at an unbelievable pace in the last six or seven months. Class C assets that are 50 years old are now regularly selling at a 4% cap rate. These are value-add assets that people expect to add value to, but no one was selling class C assets at a 4% cap before the pandemic.
Additionally, we have seen fewer delinquencies over the last six months as more people return to work. The government continues to offer substantial assistance to tenants who cannot pay, especially in blue states, contributing to the current figures.