why the cap rate change

[Chase Olson]

just a month ago, everything in my area was selling at a 7-8 cap, Now everything that is still for sale has moved to a 4.5-6 cap. anyone might know why?

[Basil Kostaras]

Great question. Depending on the properties you're looking at it may be directly related to the increase in demand for multi-family rentals when compared to single-family prices. Here in Phoenix we're seeing a big increase in median prices for single-family homes, but not a large enough increase in rental rates to maintain profitability. Because of that investors here in general are focusing on getting more bang for their buck with multi-family properties with higher rent potential.

It's a pretty basic explanation, but it seems like we're in a textbook economics supply and demand exercise. Are you seeing something similar?