The rebound of the apartment market has started. Sometime mid-to-late 2010 was likely the bottom. With five consecutive quarters of declining vacancy rates and a steady increase of savvy investor pressure pushing up prices, our market is poised for continued growth. Combine this with the lack of permitting for new apartments (only 4 units in the 1st quarter) and only 206 units in the construction pipeline, the lack of supply with the increasing demand will sustain value growth. As noted on the front page of this newsletter, developers will soon initiate permitting for more apartments as they also realize that there will be a shortfall in supply.
Apartment sales in the 1st quarter again were strong with 48 regular sales (10+ units), 10 third party acquisitions at trustee sales, five partial condo sales, one portfolio sale with 3 properties and one partially finished condo project. Of the 48 regular sales, 23 used “all cash”. Financing for the other 25 regular sales was typically either from the existing lender or a new loan. In several cases, ownership was obtained by buying the Note and then obtaining a “deed in lieu” from the borrower.
Lenders are starting to creep back into the market. There were new loans provided for all size units, but mostly for properties that had good historical financials. Some of the large, class “A” properties are being financed and sold for surprisingly low cap rates for this market – mostly on the bet for increased rents. Hard to medium-hard money is available as bridge financing for fix and flips. We even have reasonable financing sources for Canadian investors.
A sign of the times: Linda had a 75-unit listing and was struggling for a good offer late last fall. After the buyer declined the property, she put the property back on the market last month and was hit by six full-price offers in three days. If you’re debating about getting into this market – it’s time to be serious.
Jim Kasten, CCIM, Owner/Designated Broker.