Apartment market improves in Q4, investors look to other markets

Multifamily properties experienced pricing increases last year.

The multifamily market continued its boom to end 2012, as it had the most significant sales volume for a quarter in five years.

There was more than $29 billion in total sales volume during the final three months of last year, which was the most active period since the second quarter of 2007, according to a report from CoStar Group. For the full year, there was approximately $84 billion in total sector transaction, which was nearly one-third higher than the previous year. The last time the figure reached such heights was in 2007, when it was close to $100 billion.

Many investors are also taking time to seek out non-primary markets, the report explained. Investor capital increased in secondary and tertiary markets during the year, even though investment in the traditional markets was still elevated. Total core transactions declined to approximately 34 percent of all sales in 2012, which was notably less than in 2010, when the figure was nearly 40 percent.

Much of the issue left in the market is a continued lack of affordability, the report said. Many prices are too much for some investors to purchase, which may be hurting some sales volume levels.

"The fact of the matter is many investors have been simply priced out of these primary markets," said Francis Yuen, real estate economist for CoStar. "So that has opened up the question for investors, do they want to buy the nicest asset in a secondary or tertiary market or a three-Star property in a primary market. Things are certainly spreading out a bit."

Apartment rent growth may slow this year
While property management companies likely experienced some positives regarding the market in the past year, there may be slower growth levels in the coming months. Some of the most major markets may see a slowdown because of a significant number of new units added to the market, a report from CoStar explained. This is focused in such areas as New York City and Boston.

Despite this, some other areas may still see improving conditions. Silicon Valley and the San Francisco Bay Area have very positive conditions for property managers, the report added. There also may be significantly positive conditions for properties in St. Louis, Salt Lake City and Southern California, among others.

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