What’s happening in your Market?

[Jonathan Bombaci]

Whenever someone asks me what I think of the market I love referring to this slide/data.

Honestly I don’t know what the market is going to do. Anyone that tells you otherwise is either lying to you or to themselves.

That being said in looking at the MF MA data it’s easy to see why prices have increased so rapidly. The blue line is the # of MF listings on the market, the red line represents the number of units being sold. The number of units being sold is amazingly stable over a 25 year period. Inventory spiked in 2007/2008 but since then has been decreasing to an all time low in 2021 and 2022.

The market is simply experiencing a supply and demand problem. We all talk about "lack of inventory" being the problem with the market but this visual makes it easy to understand. Reduced of inventory and steady demand = price increases. While I can't prove it, I feel demand to buy MF is higher now than it was a few years ago. If inventory decreases and demand increases well that would explains the run on prices we've been seeing. Then throw in increasing rents and CAP rate suppression and the market gets a bit squirrelly (technical term).

Now rates increasing could increase supply, however we’re seeing would be sellers just not sell their properties. They have good debt and rents are strong so why sell at a discount if they don’t have to? That’s a strong objection to overcome... Maybe we see a surge in new listing inventory in the spring which would start to impact the market but until that happens in a meaningful way I don’t see the MA MF space changing in a significant way anytime soon.

Now this is just MA MF data. I believe the SF market and luxury condo market might behave differently however I don’t do much in that space and don’t track the data so I will not be speculating on it.

On the MF side were still actively buying anything that makes sense in our target areas. Frankly I feel the risk of not buying now is greater than the potential benefit of waiting to see what happens.

We also operate in NH and while I don’t have the data I “feel” the market trends are similar on the MF side. 

What do you see happening in your market?  

Big thank you Ian Hogan for pulling this data together for us on a monthly basis.