In Sharp Reversal of Recent Decline, Freddie Mac Multifamily Apartment Investment Market Index Rises in First Quarter of 2024

Rhea-AI Summary

The Freddie Mac Multifamily Apartment Investment Market Index (AIMI) rose by 8.7% in Q1 2024, reversing the previous quarter's decline. Year-over-year, the index increased 8.1%. The nationwide rise and gains in 25 regional markets indicate improved investment conditions. Lower property prices and mortgage rates were key contributors. Mortgage rates dropped by 56 basis points, the largest decline since 2010. Net Operating Income (NOI) performance was mixed, with slight growth in some regions and contractions in others. Property prices fell across all markets. This positive shift suggests a more favorable environment for multifamily investments.

Positive

• AIMI rose by 8.7% in Q1 2024, indicating improved investment conditions.
• Year-over-year, AIMI increased by 8.1%, showing sustained growth.
• The index rose in all 25 regional markets, marking a broad-based improvement.
• Largest quarterly decline in mortgage rates since 2010, dropping by 56 basis points.
• Freddie Mac is a leader in multifamily housing finance, promoting affordability and stability.

Negative

• Net Operating Income (NOI) performance was mixed, with some regions showing no growth or contractions.
• Property prices dropped in all markets, with declines ranging from -0.4% to -3.8%.
• Mortgage rates increased by 246 basis points year-over-year, the second highest annual increase since 2000.
• Ten markets experienced property price contractions of more than -10% year-over-year.

MCLEAN, Va., June 13, 2024 (GLOBE NEWSWIRE) -- The Freddie Mac (OTCQB: FMCC) Multifamily Apartment Investment Market Index® (AIMI®) rose by 8.7% in the first quarter of 2024 as well as over the full year, with the annual index up 8.1%. The AIMI’s quarterly rise occurred nationwide and in all 25 regional markets, signaling a sharp reversal from the decline last quarter. Over the last 12 months, AIMI increased nationwide as well as in all but one regional market. The synchronized gains quarterly and annually indicate improved investment conditions in the first quarter of 2024.

“A decline in property prices and interest rates contributed to the AIMI’s strong start in the first quarter of the year,” said Sara Hoffmann, director of Multifamily Research at Freddie Mac. “The rising index across the board this quarter is especially notable and was aided by the largest quarterly decline in mortgage rates since 2010.”

Over the quarter, AIMI rose in the nation and in all 25 markets. This is in stark contrast to the universal decline observed last quarter and is primarily due to lower mortgage rates. This quarter:

• Net operating income (NOI) performance was mixed. The nation and five metros saw essentially no growth (between -0.1% and 0.1%). Five metros recorded NOI growth of at least 1% while four recorded NOI contraction of -1% or less.
• Property prices dropped in the nation and in all markets, with drops ranging from -0.4% (Chicago) to -3.8% (Denver).
• Mortgage rates dropped by 56 basis points – the largest decline since the third quarter of 2010. This is a sharp reversal from last quarter when rates rose by 58 bps.
  

Over the year, AIMI increased in the nation and in all but one market. Year over year:

• NOI results were mixed. Eleven markets, plus the nation, experienced growth, while 14 markets experienced declining NOI.
• Property prices declined in the nation and in all markets. Ten markets contracted by more than -10%.
• Mortgage rates increased by 246 basis points — a slight pullback from last quarter’s jump, but still the second highest annual increase in the entire history of AIMI going back to 2000.
  

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 is the nation's multifamily housing finance leader. Historically, more than 90% of the eligible rental units we fund are affordable to families with low-to-moderate incomes earning up to 120% of area median income. 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’s mission is to make home possible for families across the nation. We promote liquidity, stability, affordability and equity in the housing market throughout all economic cycles. Since 1970, we have helped tens of millions of families buy, rent or keep their home. Learn More: Website | Consumers | Twitter | LinkedIn | Facebook | Instagram | YouTube

MEDIA CONTACT:
Melissa Silverman
(703) 388-7037
Melissa_Silverman@FreddieMac.com

FAQ

What caused the rise in Freddie Mac's AIMI in Q1 2024?

The AIMI rose due to lower property prices and a significant drop in mortgage rates.

How much did the AIMI increase in the first quarter of 2024?

The AIMI increased by 8.7% in the first quarter of 2024.

What was the year-over-year change in Freddie Mac's AIMI?

The AIMI rose by 8.1% year-over-year.

How did mortgage rates affect Freddie Mac's AIMI in Q1 2024?

Mortgage rates dropped by 56 basis points, the largest decline since 2010, positively impacting the AIMI.

What was the performance of Net Operating Income (NOI) in Q1 2024?

NOI performance was mixed, with some regions showing slight growth and others showing contractions.

How did property prices change in Q1 2024?

Property prices dropped across all markets, with declines ranging from -0.4% to -3.8%.