Three Trends we are seeing in Multifamily right now:

  1. Waiting on the sidelines. Many investors still tell us “We are on the sidelines” or “We are only buying extreme value / distressed assets right now”.
  2. Residents are financially stretched to their limits, particularly in Class C assets. With prices for food, gas, housing, and everything else increasing by 30%-100% over the past three years, we see that many Residents are financially stretched to their limit. Meanwhile, wage growth has not kept pace with goods inflation, causing real incomes to fall. This is resulting in higher bad debt / non-collections, worse vacancy trends, and many Residents downgrading from Class A properties to Class B properties, or from Class B properties to Class C properties. We see a number of multifamily owners and operators cutting rents modestly to maintain occupancy and release a bit of steam from this pressure cooker.
  3. A ‘soft landing’ seems more likely than it did 60 days ago or 120 days ago. With so many people (everyone) calling for a recession in 2023, it seems possible that the economy will experience more of a ‘soft landing’ than a sharp recession. While there have been many job cuts announced in the technology sector, and most recently by Disney, the overall jobs picture remains strong. Also, the stock market has already discounted a fair bit of economic weakness, with stocks likely to bounce around in a range over the next three to six months as the Federal Reserve winds down it’s rate hikes. We do not necessarily see a sharp rebound in multifamily rents or occupancy rates from current levels, but we also do not foresee additional deterioration.

How we are reacting to these trends? At Avid Realty Partners, we follow Warren Buffett’s school of thought when he said “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” We see this wobbly start to 2023 as an opportunity to buy quality merchandise at a lower price, and to take action when others are on the sidelines (protecting their jobs and not taking risks). We have never analyzed more properties, communicated with more brokers, or called as many potential investors. We recognize that these are tumultuous times, but we choose to capitalize on this economic opportunity. Additionally, we are casting a wide net when looking for value. We will look in any market and are continuously searching for the best value for a given property’s age, physical characteristics, demographics, and growth trends. We will look for undiscovered gems in Columbus, Indianapolis, or Louisville, in addition to Dallas, Phoenix, and Las Vegas. Indeed, we find value where others miss it. The bottom line is we will look in any market and at any deal to create value for our partners and investors. Finally, no one knows when the financial markets, will stabilize. For all of the pontificating talking heads out there (including us), nobody knows for, sure. But we feel there is only one certainty, if you are waiting for the moment the market is stable to get in the game it will then be too late.

Investors are Welcome to Reach Out

We expect 2023 will be our best year yet to buy deals at reasonable prices. We continue to look for our next acquisition and we continuously seek high-net-worth individual investors and wellcapitalized institutional partners to work within a variety of potential structures. We take great pride in two simple principles: 1) operate with Integrity in everything we do as a firm every single day, and 2) Deliver top-flight execution to those that put their trust in us. This includes Investors, Employee team members, Residents, and the community as a whole. We are interested in hearing from you, please reach out with thoughts, questions, or to make an introduction to our Team.