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With Apartment Prices at an All -Time High...
<br />Index 120014-1001
<br />170
<br />160
<br />150
<br />140
<br />130
<br />120
<br />110
<br />100
<br />90
<br />so
<br />Parc a lit
<br />2001 2003 2005 2007 2000 2011 2013 2015
<br />w Real Apartment Prices (Left scale) Rd Capitallzatlon Rate (Right somal
<br />8.5
<br />80
<br />7.5
<br />7.0
<br />6.5
<br />6,a
<br />5.5
<br />5,0
<br />4,5
<br />4.0
<br />Notes: Data are adjusted for inflation using the CPIl for All Items, and updated through 20172, Capitalization
<br />rare is the initial annual unlevered return an an acquisition, and measures the retia between the net operating
<br />income produced by property and its capital cost (the original price paid to buy the asset,
<br />Source: JCHS tohulations of Real Capital Analytics dam.
<br />...Growth in Acquisitions Has Slowed
<br />Not Apartment Acquisitions (Billions of 2016 dollars)
<br />180
<br />160
<br />140
<br />120
<br />100
<br />80
<br />60
<br />40
<br />20
<br />n
<br />24
<br />2001 2003 2005 2007 2009 2011 2013 2015
<br />■ Crass -Forcer r LL Institutional/Equity Fund 9 Ustod/REIT I Pi vata. Equity
<br />Notes: Data are adjusted for inflation using the CH J for All Items, and updated through 2x172. Net
<br />acquisitions Include transactions of$2,5 million ar more (calculated as aaquishlans net of dispecitions).
<br />Cross border means that ane or more buyers are headquartered outside of the tis, IJstad/REIT Includes reel
<br />estate investment trusts, publicly traded funds investing directly in reel estate, and real estate operating
<br />companies, Figure excludes unknown/other buyers.
<br />Source, JCHS tabulations of Real Capital Analytics data.
<br />als (both attached and detached, and including vacant units) was
<br />essentially flat between 2014 and 2016, and increased only slightly
<br />(by 0.6 percent) in 2015-2016. However, recent growth in occupied
<br />single-family rentals remained strong in fast-growing markets of
<br />the West and South, including Austin, Charlotte, Denver, Houston,
<br />Orlando, and Phoenix.
<br />Healthy investor appetite has driven up the real prices of investment-
<br />grade apartment properties by 9.3 percent annually over the past
<br />seven years. Real Capital Analytics data indicate that real apartment
<br />prices stood 24 percent above their 2007 peak in mid -2017 (Figure 25).
<br />Prices for properties in highly walkable central business districts are
<br />particularly high, up 84 percent from their previous peak. Properties
<br />in highly walkable suburbs have also appreciated rapidly, exceeding
<br />the previous peak by more than 40 percent, Although much slower
<br />to recover, rental property prices in more car dependent suburbs still
<br />surpassed previous peaks by 13 percent by mid -2017.
<br />The apartment property market is, however, cooling, Prices declined
<br />slightly for the Midwest and Northeast regions over the past year.
<br />And while prices in several metros in the West and South (includ-
<br />ing Atlanta, Los Angeles, Nashville, Phoenix, San Diego, Seattle,
<br />and Tampa) continued to climb through mid -year, prices in several
<br />others (Charlotte, Houston, Orlando, and San Jose) declined in real
<br />terms.
<br />NCREIF estimates show that the total return on investment in the
<br />multifamily sector, including net income and appreciation in proper-
<br />ty values, exceeded 10 percent annually from late 2010 through early
<br />2016. But with price appreciation slowing, ROI ramped down to a still
<br />respectable 6.2 percent in mid -2017, Investor appetite nonetheless
<br />remains strong, with CBRE reporting historically low capitalization
<br />rates for multifamily assets in nearly all markets and tiers in the
<br />first half of this year.
<br />MULTIFAMILY SALES VOLUME SOFTENING
<br />According to Real Capital Analytics, the annual volume of large apart-
<br />ment purchases (prices of $2.5 million or more), net of dispositions, bit
<br />a record high of $169.6 billion in the third quarter of 2016 in real terms,
<br />a 30 percent increase from the previous peak in the second quarter of
<br />2006. By mid -2017, though, deal volume edged down to 148.1 billion,
<br />with declines in both international and institutionaL/equity fund invest-
<br />ments. More than half (63 percent) of net acquisitions came through pri-
<br />vate domestic sources, while 33 percent were through institutional and
<br />equity funds, The shares of REITs and foreign investment were small by
<br />comparison, in the 5-6 percent range.
<br />With pricing at or near all-time highs and limited inventory on the
<br />market, large apartment deals in five of the six major metro areas
<br />tracked by RCA—Boston, Los Angeles, New York City, San Francisco,
<br />
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