Market Update: December 2023

Hi All!

Happy Holidays! For the December market report, I am going to share one data point related to multi-family inventory.

In last month’s newsletter, I discussed how multi-family transaction volume was way down, but prices were not.

This month I’ll share a related metric on months supply of inventory. This metric refers to the number of months it would take, given current sales pace, for the current inventory of multi-family homes to sell off completely.

See the chart below for data comparing Q3 and Q4 of this year to last year. (Note that we are using data through December 1st of this year).

You’ll see that months supply of inventory is way up this year. This aligns with the lower transaction volume we discussed last month. Properties are sitting as buyers become more hesitant in a high interest rate environment. Sellers are also maintaining high asking prices, which investors are still willing to pay, but only for ideal properties in great locations.

On the ground, I'm seeing that if your multi-family is ALL of the following:

• Close to a T stop

• In relatively good condition

• Has a good layout

• Is easy to show (i.e. coordination with current renters is easy)

There’s a good chance your property will sell in 1-3 weeks, assuming it’s priced appropriately.

On the other hand, if it..

• Is 20+ minutes from a T stop

• Is in poor condition with major defects

• Has a sliced up layout or contains clunky nonsensical spaces

• Is difficult to show

There’s a good chance your property will take multiple months to sell and/or will need to be reduced significantly in price to get the property sold within a few months time.

I anticipate an uptick in transaction volume next year as sellers come to terms with this new reality, and begin to adjust on price. I also expect rates to come down a bit sometime between Q2 and Q3 of 2024, which should increase buyer demand AND multi-family sold prices.