With $1.99 trillion in multifamily mortgage debt expected to mature by 2028, the market is bracing for a wave of distressed properties and potential price adjustments, according to Gray Capital. The Indianapolis-based owner/operator and syndicator notes that certain areas of the market are already seeing changes as property owners prepare for cap rate expansion and declining prices.
The report highlights how higher interest rates have led to lower returns for investors at current prices, resulting in decreased sales activity and a significant bid-ask gap. This trend is expected to continue as expenses rise, income growth slows down, and lending terms become stricter – all contributing factors towards a more favorable pricing environment for buyers.
Furthermore, projections show an increase in long-term interest rates since Gray Capital’s previous report on multifamily loan maturities. With the Federal Reserve projecting an increase from 4.6% to 5.1% by 2024, there will likely be further price discovery driven by increased distress during Q4 of 2023.
Despite recent reports suggesting that multifamily price declines may soon come to an end according CBRE data analysis , low transaction volumes make it difficult use cap rate measurements as accurate indicators of confidence in the market says Gray Capital . Headwinds such as rising interest rates , new construction projects , student loan payments resuming,and potential economic downturns also pose challenges for apartment performance.
However,the long-term outlook remains positive with high demand still present within the sector.Gray Capital emphasizes this point while also promoting their upcoming panel on distressed assets at Connect Investment & Finance Conference on October24th at Hyatt Regency O’Harein Rosemont,Illinois.For timely insights into current market conditionsand what lies ahead,this event should not be missed.Register now through our website!
