The Freddie Mac Multifamily Apartment Investment Market Index® (AIMI®) experienced a decline in the fourth quarter of 2023, yet it showed an overall increase for the year, indicating improved investment conditions compared to the previous year. Despite persistently high mortgage rates, which contributed to a nationwide and regional decline in the fourth quarter across all 25 measured markets, and a concurrent decrease in net operating income (NOI), the annual performance remained positive nationally and in the majority of regional markets.
Sara Hoffmann, the Senior Director of Multifamily Research at Freddie Mac, noted the contrasting directions of AIMI at the year’s end, highlighting the overall annual increase despite the fourth-quarter downturn. This was attributed to adjustments in the market to higher interest rates, a significant drop in property prices, and a nearly flat NOI across 2023. The situation suggested that investors were obtaining more value per dollar of property income than a year prior.
Throughout 2023, mortgage rates saw a rise of 72 basis points, considered high by historical standards but the smallest annual increase since early 2022. The year’s NOI results varied, with growth in 10 markets, a decline in 14, and flat results in the nation and Seattle. Property prices decreased across the board, with nearly half of the regional markets experiencing a contraction of more than -12%.
The fourth quarter of 2023 marked a pronounced downturn, with NOI and property prices falling in all markets, except New York, which saw a slight increase. Freddie Mac also provides a sensitivity table that shows how AIMI values adjust with changes in key variables, offering a comprehensive tool for analyzing multifamily market investment conditions.
AIMI serves as an analytical instrument combining multifamily rental income growth, property price growth, and mortgage rates to measure the multifamily market investment climate. An increase in AIMI indicates a more favorable investment environment, whereas a decrease suggests more challenging conditions for finding attractive investments compared to the prior period.
Freddie Mac Multifamily plays a pivotal role as the nation’s leader in multifamily housing finance, with a focus on making housing accessible for families with low-to-moderate incomes. The majority of loans purchased by Freddie Mac are securitized, thereby transferring most of the credit risk from taxpayers to private investors. Freddie Mac’s enduring mission is to enhance liquidity, stability, affordability, and equity in the housing market, assisting millions of families in their homeownership and rental needs since 1970.
For the full details and insights, please refer to the original press release at the following link: https://freddiemac.gcs-web.com/news-releases/news-release-details/freddie-mac-multifamily-apartment-investment-market-index-2