3rd Quarter Report
October 3, 2024 – Bloomfield Hills, MI
IPO is pleased to announce our 2024 multifamily investment sales through Q3. After two years and 10 consecutive interest rate hikes (followed by a few pauses) the Federal Reserve has finally started to cut the Federal Funds Rate, which peaked at 5.5%, the highest level in a quarter century. In what many market observers felt was a surprise move, the Fed cut rates by 50 bps, whereas the market forecasted a 25-basis point drop. This signals that the Fed may feel the need to cut rates faster and more aggressively than previously expected to manufacture the “soft landing” so often envisioned, and thereby avoid a recession. As the Labor Market cools and rates begin to fall, we are seeing a drastic pick-up in activity and market sentiments from active participants.
Many opportunistic investors who have been waiting for a glut of “distressed deals” that have been predicted by many doomsdayers are left to reconsider their business strategy as this has not materialized. The discount on pricing is beginning to retreat due to the rate cut coupled with a notable increase in buyer activity and sentiment. We anticipate 2025 to be a busy year as deals with approaching loan maturities will garner fair pricing that enables trades to resume to a normalized level. We are still down well over 50% from 2021-2022 levels, but the firm’s pipeline is expanding daily with many pending sales across the Midwest. During Q3, IPO closed on 11 transactions totaling over 600 units and $41M in transactional volume. IPO has accounted for nearly half of all multifamily sales in our core markets over the last 18 months, drastically outperforming our competitors.
- 8 investment sales transactions, reflecting 605 units in total and $41,5000,000 in volume.
- Sales in markets across Michigan, Ohio, and Indiana.
- Pending sales in 5 Midwestern states and other markets we service. We are seeing promising activity in Kentucky and Tennessee as we expand our reach further into the southernmost Midwestern markets.
- A significant amount of affordable housing transactions as IPO develops a niche business selling LIHTC, RD, and HUD subsidized properties for some of the largest affordable housing developers in the Midwest.
Notable Transactions:
Hines Park, Westland, MI
Birmingham Flats, Birmingham, MI
Regency Townhomes, Lansing, MI
IPO expects sales to increase considerably in 2025 and fully resume by 2026, due to declining rates and the investor confidence this creates. We expect business to accelerate quarter-over-quarter as rates continue to decline, and have seen some increased motivation from prospective sellers and expect that trend to continue. With rates on non-recourse loans hitting the mid-fives, refinancing activity will accelerate, and banks will lag behind, still grappling with their overleveraged balance sheets. Financing is available but not as abundantly for bank debt, and that will hamper the recovery until banks have corrected their balance sheets as deals get refinanced or sold. Under no reasonable interpretation of the current and trending market can we envision any softening of prices, only improvement from here and beyond can be forecasted.
We would like to thank our clients for entrusting us with your multifamily investment brokerage needs. Often that entails selling a property; sometimes it is providing intelligent, insider data and analysis. As this unique market cycle evolves, our brokerage – made up of nimble and creative problem-solvers – will navigate through deals in challenging landscapes. We strive to be the best brokerage in the apartment industry and reflect it in everything we do. Our goal is to build partnerships that stand the test of time and deliver significant value for our clients, and in the process create generational wealth. No matter the market conditions, there are great opportunities to be found and deals to be made. Our firm has been able to serve clients with insight and skill through all market cycles over the past three decades, and that will still be the case for the next three to come.