Apartment Buildings Bust – High-Interest Rates Deter Apartment Seekers
Throughout the end of 2022, the housing market suffered detrimental blows that left prices rising and demand falling. This year, things have improved, however, not without its privations. The 30-year fixed-rate mortgage surged to over 7% during the month of March but has now steadily decreased roughly 30 basis points in the past three weeks. Unfortunately, the newest metric to release doesn’t depict this same improvement; for the first quarter of 2023, the sales of rental apartment buildings had plummeted 74% year-over-year, a drop that hasn’t been seen since the Great Recession. First-quarter sales of investors purchasing apartment buildings marked $14 billion relative to the previous year’s sales of over $50 billion during the same time.
The sharp decline in apartment building sales reflects a loss in demand due to the recent fiscal pressure placed on investors, whether it be high-interest rates, decelerating rent growth, or the regional banking crisis. Just below office space, apartment renting has been the second worst real estate investment in the past 12 months due to the changes in property values, which have reached a decline of over 21% in the past year. Nevertheless, investors should also consider the upcoming housing data releasing in two weeks, as both building permits and existing home sales for the month of March may shed more light on where the housing market is set to go this year.
Want to learn how to invest? Download the Invstr app, where you can play Fantasy Finance and manage a virtual investment portfolio or open a brokerage account and invest for real. Take our interactive investing course on Invstr Academy and become a better investor today!
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
