Is a multifamily bubble on the horizon?

The average price per unit soared 21.6%, the biggest one-year jump in decades. High prices were justified by the 17.7% compound annual growth rate for the 4,500 multifamily properties (about 5.3% of 83,000 properties in Matrix’s database) sold at least three times over the past decade. Multifamily rent growth was not far behind at a record pace of 14%.

“Investors will pay a premium for strategically located value-add properties,” Yardi said. “Investors were laser-focused on secondary markets and areas with strong in-migration—particularly Texas, the Southeast and Southwest— where demand and rent growth are increasing faster than the rest of the nation. Relatively few properties in gateway markets made the list of repeat sales, in part because acquisition yields in those markets are already high and provide less room for upside.”

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Investors tend to put more money into smaller assets geared toward working-class renters. These investments have the potential for high rent growth because those properties have relatively low rents and are in markets with above-trend rent growth, explained Paul Fiorilla, director of research at Yardi Matrix.

“They have the potential for high rent growth because those properties have relatively low rents and are in markets with above-trend rent growth,” wrote Paul Fiorilla, director of research for Yardi Matrix.