Multifamily property sales totaled about $100 billion in 2018, the largest annual volume recorded, and apartment prices reached new highs last year. Rent is expected to rise about 3% in 2019 with cap rates close to last year’s level, supporting further gains in property values.
Multifamily sales and prices nosedived during the Great Recession but recovered sooner and faster than single-family. According to the CoreLogic Home Price Index for the U.S., home values hit bottom in March 2011, but we found that the recovery in multifamily prices began a year earlier. (Figure 1) A review of CoreLogic’s public records data found that the median purchase price exceeded $100 per square foot in 2018, up 5% from 2017 and more than 50% from the 2010 trough.
Property sales volume and prices vary widely by metropolitan area. The New York and Los Angeles metropolitan statistical areas top all others in apartment building sales, together accounting for about 20% of the national dollar volume. Differences in land values and rent equate to wide variation in sales prices. (Figure 2) The sales price per square foot tends to be highest in metros along the Pacific coast and in the New York City region. Among the 20 largest multifamily sales markets, we found that San Francisco had the highest median sales price per square foot for apartment buildings during 2018, about quadruple the national median price.
The size of apartment buildings traded also varies greatly. (Figure 3) During 2018, nearly one-quarter of the properties sold had less than 20 apartments, and about one-quarter had more than 300 apartments. The difference in project size and location of larger projects in higher-cost areas also led to large differences in the sales price per property. Nationally, nearly one-quarter of apartment building sales volume was for properties sold for $5 million or less, and another one-quarter was for properties that were sold for $50 million or more.
With rent growth expected to outpace inflation in 2019 and cap rates remaining low, multifamily property values should rise further in 2019, albeit at a slower growth than last year.
 Urban Land Institute Real Estate Economic Forecast, April 2019.
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