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Apartment Sales Plunge As Lower Values, Cost Of Financing Stop Deals In Their Tracks

Apartment sales have plummeted to their lowest point in 11 years, signaling hesitance among investors who once viewed the sector as commercial real estate’s golden child.

Investors purchased $14B worth of apartment buildings in the first quarter of 2023, a 74% drop year-over-year and the largest decline since Q1 of 2009, according to a Wall Street Journal report citing CoStar Group data. The $14B sales volume also represented the lowest amount for any quarter since 2012, per the WSJ.


After months of record-setting activity, investment in multifamily is beginning to mirror that of other asset types. Buyers faced with the widening gap between what a building is worth and what it would cost to finance are struggling to make deals pencil.

At the same time, sellers are resisting today’s lower prices, forcing an impasse that translates to a near-freeze in transactions.

“Nobody wants to take a loss when they don’t have to,” Graham Sowden, director of acquisitions at Dallas-based RREAF Holdings, told the WSJ.

The price of apartment buildings is also down, dropping by 8.7% in February compared to a year prior, according to MSCI. This could be a silver lining for tenants beset by rent spikes over the past couple of years. 

Rental rate growth has been on the decline since the midpoint of last year, and though rents were up by 2.6% in March, the pace of growth is still far below double-digit highs recorded during the pandemic, per the WSJ.

Pain in the banking industry may also force owners with floating-rate debt to sell their properties once loans come due. Dallas-Fort Worth, one of the nation’s top performers for multifamily investment, has $1.9B worth of securitized debt set to mature in 2023, and many of those properties may fall short of the proceeds required to refinance.

“[Owners are] left with no good choices,” Keith Van Arsdale, president and CEO of Dallas-based BMC Capital, told Bisnow in an email. “Many owners are being forced to sell their assets rather than take the hit on purchasing a more expensive interest rate cap for a refi loan.”