Apartment investment should strengthen across the United States by the second half of 2024 as more stable interest rates give buyers and sellers the confidence to narrow the gap in prices, multifamily executives said during Marcus & Millichap’s annual discussion about prospects for the new year.
Executives representing companies across the U.S. sounded a positive note during an online broadcast hosted by the Calabasas, California-based brokerage firm. They reasoned the market had nowhere to go but up after U.S. apartment investment cratered this year as investors reacted to higher interest rates, recession fears and an inability to agree on deal prices caused buyers and sellers to step back from the market.
“I’m optimistic there will be more opportunity for investment as we move into 2024 and there will be some good buys in the near future. It’s hard to imagine that there will be less,” said Doug Root, co-founder and managing partner of Blackfin Real Estate Investors, an Arlington, Virginia-based multifamily investment firm that owns more than 11,000 units. “There’s a culmination of rents slowing a bit and more investors coming to the realization that valuation hasn’t materially changed."
The economy is in a better place now than when inflation flared and the Federal Reserve moved to tame it by imposing rate hikes that made financing much more expensive. Many economists now predict the economy can avoid recession and maintain steady employment growth, allowing the Fed to — if not immediately ease rates — at least stop raising them.
John Chang, senior vice president of research for Marcus & Millichap, said during the broadcast that analysts now project that the economy will grow 2.4% in 2023.
“This is the soft landing model that the Federal Reserve is hoping for, where the pace of job additions has been steadily slowing down,” Chang said. “The U.S. is expected to add close to 3 million jobs in 2023 and another 1.7 million in 2024, with the pace slowing during the year. We still have a labor shortage, but it is tapering, and we’re moving in the right direction.”
