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The Freddie Mac Multifamily Apartment Investment Market Index (AIMI) dropped by 11.7% in the second quarter, with the index down 17.9% year over year. Driven primarily by record mortgage rate spikes, the index decreased nationwide and in all 25 markets on an year-over-year and quarter-over-quarter basis.

The AIMI combines multifamily rental income growth, property price growth, and mortgage rates to provide a single index measuring market investment conditions. A decline suggests attractive investment opportunities are becoming more difficult to find compared with the prior quarter, while an increase from one quarter to the next implies an increasingly favorable environment for investment opportunities.

The nation and 11 markets saw their largest annual AIMI decline in the index’s history. According to Freddie Mac Multifamily, over the past year, property prices have seen significant growth, increasing by 21.8%; net operating income (NOI) has grown by 17.7%; and mortgages have risen by 1.31 percentage points, the largest historical increase for the index.

“The impact of the rapid and substantial increase in both mortgage rates and property prices is evident in this quarter’s AIMI,” said Steve Guggenmos, vice president of research and modeling at Freddie Mac Multifamily. “Although higher rates and property prices have driven the index down, NOI growth remains strong. The drop in AIMI this quarter reflects moderating investment conditions brought about by changing trends in the broader economy. There still exists an overall housing shortage, which is keeping vacancy rates low and rents high.”

Other key findings include:

  • National NOI growth was 3% quarter over quarter, with every metro seeing growth—Miami was the fastest grower at 4.7%, while Phoenix was the slowest at 0.5%;
  • Quarter over quarter, property prices grew nationwide and in all markets except for Philadelphia;
  • On a year-over-year basis, NOI growth exceeded 10% in all but one metro—Minneapolis; New York topped the metros with 29.7% annual growth; and
  • Property prices grew in the nation and in every market year over year. Only three metros saw less than 10% growth, while 15 exceeded 20% growth.