Freddie Mac’s Apartment Investment Market Index Remains Positive in Q4 Despite Contractions in Major Metro Areas

Rhea-AI Summary

The Freddie Mac Multifamily Apartment Investment Market Index (AIMI) rose by 0.5% in Q4 2020, following a growth of 1.9% in Q3 2020. This increase is attributed to falling mortgage rates despite challenges in net operating income (NOI) and property price growth due to the COVID-19 pandemic. Yearly, AIMI improved by 3.4% as mortgage rates decreased by 57 basis points. While most markets saw positive trends, significant contractions were evident in areas like New York and San Francisco, where NOI fell by 6.2% and 9.4% respectively.

Positive

• AIMI increased by 0.5% in Q4 2020 and 3.4% annually, indicating favorable investment conditions.
• Mortgage rates decreased by 57 basis points over the year, enhancing affordability.

Negative

• NOI contracted nationally and in most markets, particularly in New York and San Francisco.
• Some local markets experienced significant property price drops, hindering overall growth.

MCLEAN, Va., March 17, 2021 (GLOBE NEWSWIRE) -- The Freddie Mac (OTCQB: FMCC) Multifamily Apartment Investment Market Index^® (AIMI^®) rose by 0.5% in Q4 2020 after a rebounding (1.9%) in Q3 2020. The marginal growth reflects a quarter where falling mortgage rates offset negative change net operating income (NOI) and property price growth, both driven in part by the COVID-19 pandemic. On an annual basis, AIMI rose by 3.4% as mortgage rates decreased by 57 basis points (bps).

“Over the year, AIMI remained positive nationally and in most markets, but some local markets felt the impact of the pandemic more acutely and experienced substantial contractions,” said Steve Guggenmos, vice president of Freddie Mac Multifamily Research and Modeling. “AIMI continued to grow in the fourth quarter, continuing the trend of generally resilient multifamily fundamentals throughout the pandemic.”

Over the quarter, AIMI increased in the nation and in most markets. Sixteen markets experienced quarterly growth while nine metros experienced quarterly contraction.        

• Most metros experienced a decline in NOI. The nation and 16 markets experienced quarterly NOI contraction, while nine metros experienced positive NOI growth. Like last quarter, New York and San Francisco were especially pronounced, dropping –6.2% and -9.4%, respectively.
• Property price growth was also mixed. Prices grew in the nation and in 14 markets while prices dropped in nine markets. Two markets (Atlanta and Philadelphia) experienced effectively no property price change.
• Mortgage rates decreased by 20 bps.
  

Over the year, AIMI increased in the nation and in 18 markets, while 7 markets experienced an AIMI drop.

• NOI dropped in the nation and in 15 markets. New York and San Francisco posted double digits NOI losses for the second consecutive quarter. Ten markets posted annual NOI gains, including Jacksonville and Phoenix which each exceeded 5% growth.
• The nation and 16 markets experienced property price growth, while nine metros experienced contraction. Property prices grew by 11.2% in Phoenix – far higher than any other metro.
• Mortgage rates decreased by 57 bps – a more severe drop than last quarter, but not as extreme as each of the prior four quarters.
  

In addition to national and local values, a sensitivity table is available that captures how the index value adjusts based on changes in certain underlying variables. Additional information about AIMI is on the Freddie Mac Multifamily website, including FAQs and a video.

AIMI is an analytical tool that combines multifamily rental income growth, property price growth and mortgage rates to provide a single index that measures multifamily market investment conditions. A rise in AIMI from one quarter to the next implies an increasingly favorable environment for multifamily investment opportunities, while a decline suggests that attractive investment opportunities are becoming more difficult to find compared with the prior period.

Freddie Mac Multifamily helps ensure an ample supply of affordable rental housing by purchasing and securitizing mortgages on apartment buildings nationwide. Roughly 90% of the mortgages purchased support rental units for households earning 120% of area median income or below. Freddie Mac securitizes about 90% of the multifamily loans it purchases, thus transferring the majority of the expected credit risk from taxpayers to private investors.

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we’ve made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders, and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.

MEDIA CONTACT:
Erin Mancini
(703) 903-1530
Erin_Mancini@FreddieMac.com
Kate Hartig
(703) 903-3802
Kate_Hartig@FreddieMac.com

FAQ

What is the latest AIMI report for FMCC?

The latest Freddie Mac AIMI report shows a 0.5% rise in Q4 2020 and a 3.4% annual increase.

How did mortgage rates impact FMCC's AIMI in Q4 2020?

Mortgage rates decreased by 20 basis points in Q4, contributing to the AIMI's growth.

Which markets saw significant changes in NOI according to FMCC's AIMI?

New York and San Francisco reported substantial NOI declines of -6.2% and -9.4% respectively.

How does FMCC measure investment opportunities with AIMI?

AIMI measures multifamily rental income growth, property price growth, and mortgage rates to assess investment conditions.