Q1 Multifamily Recap and Market Overview

We take a brief look at multifamily investing in Q1 and anticipate positive outcomes in Q2.

The multifamily real estate market has been a hot topic for investors in recent years, and for good reason. Despite the challenges due to the pandemic, the multifamily market has remained resilient and continues to attract investment. However, as we move forward, it's essential to understand the latest trends and data to make informed investment decisions. In this article, we'll review recent and current data on multifamily real estate investing and provide insights into what we can expect from the market going forward.

Q1 Recap and Market Overview

As we moved through the first quarter the multifamily investment market continued to cool off after two years of record high sales volumes. In the height of COVID, investment sales skyrocketed as investors took advantage of record low interest rates. According to Yardi Matrix, the multifamily sector hit record high sales volumes with $223 billion in transaction volume in 2021 and only a slight drop to $184 billion in 2022.

A major reason for the decrease in transaction volume is increased interest rates. In 2021 the average mortgage rate was 2.96 percent. The Fed began raising interest rates in March 2022 and has since then increased rates nine times. The Fed’s current target rate is between 4.75 and 5 percent, which is a deterring factor for investors who scored deals in 2020 and 2021. Inflation has also contributed to the slow down as it impacts the cost of building, materials, and labor.

Along with inflation, cap rates also increased sharply in Q2 2022, further suppressing the growth and development within the real estate market. According to CBRE cap rates are stabilizing, however, we will need interest rates and inflation to stabilize before we see thriving investment activity.

We remain cautiously optimistic about the future of multifamily as we progress through the second quarter.

Looking Ahead Into Q2 2023

According to Yardi Matrix, there are currently over 1 million apartment units under construction in the United States. Some markets may struggle with the issue of over-supply in the short-term, however, we are still experiencing a housing shortage nationwide. We also do not expect to see a decrease in rental demand due to job growth and inability to afford a home.

​​Despite short-term challenges, there are numerous reasons to remain optimistic about multifamily housing in the long-term. This asset type has historically outperformed other real estate types due to the short-term nature of residential leases, which allows owners to raise rents more quickly to keep pace with operational costs that are on the rise.

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About CALCAP Lending

A division of CALCAP Advisors, CALCAP Lending benefits from the expertise of a seasoned team of professionals with extensive, successful track-records covering a variety of disciplines and leading large, nationally-recognized institutions. A private money direct lender, CALCAP Lending provides short to mid-term financing for property investors and businesses looking to purchase, refinance, renovate, and construct residential or commercial properties.

Lending FAQs

You've got questions, we've got answers.

What is private money lending?

Private money lending is a collateral-based lending strategy that is often associated with shorter terms and more attractive features. A private money loan offers more flexibility than a conventional mortgage or bank loan.

How does a private money loan work?

Private money lenders provide financing using money from private entities. Private money loans often work as bridges to help investors gather funds to achieve their short term real estate goals, but long term, permanent options may also provide.

Why would I choose a private money lender?

There are many advantages to using a private money lender for your real estate investments! Private money lenders can be more lenient when it comes to borrower credit issues, often there are no prepayment penalties, you can leverage your cash to buy multiple properties, and private money loans are quicker when compared with institutional loans.

Can I get prequalified for a loan?

CALCAP has a responsive loan team who are able to prequalify you. Contact a loan specialist at 833.816.5580 to get started.

How long does the lending process take?

Private money lending can be a quick and painless process. From start to finish, 30 days is common, however, turn around times can be as short as 10 business days.

Can I still be approved for a loan if I have bad credit?

Generally yes, we understand that people have temporary financial issues that come up, and we want to work with you to help you rise up financially to a better place. Offsets to credit concerns may include experience as a real estate investor, good cash reserves, and/or larger down payments.

I am a broker or investor, how can I work with CALCAP?

Business is built on relationships. Ours is no different. CALCAP Value and Preferred Partners receive exclusive rates and services. For more details and to submit your application, visit our partners page.

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