The Freddie Mac Multifamily Apartment Investment Market Index (AIMI) fell by 7.6% in the fourth quarter of 2022, with the index down 25.8% year over year.
AIMI decreased nationwide and in all 25 markets on both a quarterly and annual basis, driven primarily by rising mortgage interest rates. The nation and 22 markets experienced their sharpest annual AIMI decline in the history of the index.
“The extraordinary increase in mortgage rates drove the decline in AIMI as 2022 concluded,” says Steve Guggenmos, vice president of research and modeling at Freddie Mac Multifamily. “Rising rates and slowing property cash flows impacted investment conditions, despite the fact that multifamily fundamentals that drive property cash flows are not expected to weaken significantly.”
Net operating income (NOI) contracted in the nation and in every market except for Miami. NOI change is negative for most fourth quarters, so this result is not atypical.
Property prices dropped in the nation and in every market except for Tampa.
Contractions were larger than normal this quarter; the nation experienced its largest drop since 2009, as did all but five metros. Mortgage rates increased by 100 bps — the largest quarterly increase since AIMI’s inception.
Over the year, AIMI decreased in the nation and in all 25 markets, driven by the large increase in mortgage rates. The nation and 22 metros experienced the largest annual AIMI percentage decline since the series started in 2000.
Property price performance was mixed but generally positive. The nation and 18 markets experienced price growth whereas prices declined in seven markets.
Mortgage rates increased by 282 bps.
AIMI is an analytical tool that combines multifamily rental income growth, property price growth and mortgage rates to provide a single index that measures multifamily market investment conditions. A rise in AIMI from one quarter to the next implies an increasingly favorable environment for multifamily investment opportunities, while a decline suggests that attractive investment opportunities are becoming more difficult to find compared with the prior period.
