Renter household formation has outpaced owner household growth during the past few years, spurring a huge increase in multifamily property sales and new construction.
Despite the boom in multifamily sales and development, Freddie Mac's latest Economic and Housing Market Outlook found that residential property values "remain consistent with fundamental economic forces in the housing market," and that the rate of appreciation for multifamily property values moderated over the past year.
Many investors have made note of the cap rate compression in the multifamily space. The American Council of Life Insurers (ACLI) reports cap rates on apartments with new mortgages made by life insurers have fallen, dropping from 8.9 percent in the first quarter of 2003 to 5.77 percent in the second quarter of 2013, a 35 percent decline and the lowest recorded by ACLI since the series’ inception in 1965.
Read more...No Bubble In Multifamily Values, According to Freddie Mac - CoStar Group