Freddie Mac Apartment Investment Market Index Remains Positive in Q4 2020

Article originally posted on Multifamily Executive on March 24, 2021

Freddie Mac’s Apartment Investment Market Index (AIMI) increased by 0.5% in the fourth quarter of 2020 after a rebound, 1.9%, in the third quarter.

The AIMI combines multifamily rental income growth, property price growth, and mortgage rates to provide a single index measuring market investment conditions. An increase from one quarter to the next implies an increasingly favorable environment for investment opportunities while a decline would suggest attractive investment opportunities are becoming more difficult to find compared with the prior quarter.

According to Freddie Mac Multifamily, the slight increase in the fourth quarter is due to falling mortgage rates offsetting negative change net operating income (NOI) and property price growth, both driven in part by the COVID-19 pandemic. On an annual basis, AIMI increased by 3.4% as mortgage rates decreased by 57 basis points.

“Over the year, AIMI remained positive nationally and in most markets, but some local markets felt the impact of the pandemic more acutely and experienced substantial contractions,” said Steve Guggenmos, vice president of Freddie Mac Multifamily Research and Modeling. “AIMI continued to grow in the fourth quarter, continuing the trend of generally resilient multifamily fundamentals throughout the pandemic.”

Quarter over quarter, AIMI increased in the nation as well as most markets, with 16 experiencing quarterly growth and nine experiencing quarterly contraction. The nation and 16 markets saw a quarterly NOI contraction, while nine markets experienced positive NOI growth. New York and San Francisco dropped -6.2% and -9.4%, respectively.

Property price growth also was mixed, according to Freddie Mac Multifamily. Prices grew in the nation and in 14 markets while they dropped in nine markets. Atlanta and Philadelphia were the two markets that had no property price change.

Year over year, AIMI increased in 18 markets, while seven markets saw a drop. NOI dropped in the nation as well as in 15 markets, with New York and San Francisco posting double-digit losses for the second consecutive quarter. Ten markets experienced annual NOI gains, including Jacksonville, Florida, and Phoenix, which both exceeded 5% growth.

The nation and 16 markets saw property price growth, while nine experienced contraction. Phoenix saw the most growth, with property prices increasing by 11.2%, much higher than any other market.