Freddie Mac’s Apartment Investment Market Index (AIMI) decreased by 4.8% in the fourth quarter of 2021, down 2.4% compared with the fourth quarter of 2020. According to the government-sponsored enterprise, record multifamily price appreciation, which saw its largest single-quarter gain in the index’s history, and rising mortgage rates more than offset the growth in net operating incomes (NOIs). Over the past year, property prices increased 19.6%, mortgage rates grew by 6 basis points, and NOIs rose 17.7%.
The AIMI combines multifamily rental income growth, property price growth, and mortgage rates to provide a single index measuring market investment conditions. An increase from one quarter to the next implies an increasingly favorable environment for investment opportunities while a decline suggests attractive investment opportunities are becoming more difficult to find compared with the prior quarter.
“The year-over-year AIMI decline shows that it may be more difficult to find attractive multifamily investment opportunities in some markets than it was a year ago,” said Steve Guggenmos, vice president of research and modeling at Freddie Mac Multifamily. “Even though we’re seeing off-the-charts NOIs, price are also rising dramatically. In most markets, investors are paying more per dollar of property income compared with one year ago.”
Quarter over quarter, AIMI decreased in 24 of the 25 select markets, with New York as the exception. NOI and property price growth were both strong, but prices grew quicker and led to these AIMI declines. While the NOI growth nationally over the quarter was 3.5%, every metro saw growth. New York topped the list at 7.3%, while Minneapolis experienced the slowest growth at 0.6%.
In addition, property prices increased in the nation and all 25 markets over the quarter. While the national growth was at 7%, Las Vegas, Phoenix, and Raleigh, North Carolina, all grew by more than 10%. Mortgage rates also increased by 12 basis points, the largest increase since the fourth quarter of 2018, according to Freddie Mac.
Year over year, AIMI decreased in 11 of the 25 markets, while the remainder experienced an increase. NOI growth exceeded 10% in all metros except for Minneapolis, and property prices grew in every market. Phoenix property prices came in at the top, seeing a 41.8% jump, while New York was the slowest grower at 2.8%.