Modest Activity in Multifamily Transactions

Fresh from our research desk-Recent multifamily transaction activity has been modest, with the fourth quarter seeing $1.9 billion in sales, following $1.6 billion in transactions during the third quarter. This level of activity remains below the $2.2 billion in sales seen on average quarterly over the past decade. One key factor restraining activity has been higher debt costs.

In addition to this, sales in the City of Los Angeles have faced another challenge. Since April 2023, sellers in the city have encountered an additional 4% transfer tax for any sale above $5.15 million and 5.5% for any sale above $10.3 million. As a result, most buyers considering purchases seek discounts to recent peak values. Several brokers report that buyers expect a 15-30% discount relative to early 2022 pricing. This is corroborated by average market pricing, which is down around 20% to $360,000 per unit.

Forecast and Future Prospects

The forecast anticipates that pricing has bottomed out and the cap rate expansion seen over the past two years has peaked. Market fundamentals are expected to improve in 2025, likely making investors more optimistic about rent growth and their ability to improve cash flows with prospective acquisitions. In this scenario, pricing should rise. However, the recovery in property values is expected to take years, with average market pricing per unit anticipated to reach prior peak pricing around late 2028.

Explore Your Options with The Ponce Real Estate Group

The Ponce Real Estate Group is well-versed in 1031 exchange transactions. If you are considering selling and moving your money to another state, give us a call. Or if you would like a no-obligation evaluation, we are here to help. Your property may be worth more than you think—why not find out?

Contact us today:

·         Frank: (310) 503-4158

·         Viktorie: (424) 301-0075

Let us assist you in navigating the real estate market and making the most of your investments.