How to know when your apartment market cycle is peaking…

Apartment Investment Cap Rate Vancouver BC

Quote: “[A] very active market that continues to give strong weighting to underlying land value and potential future use, even if this use is far off in the future.” – James Glen, VP, Colliers Vancouver, BC [Emphasis mine]

Any time you see future and potential in the same sentence referring to real estate, watch out…

Oh and another sign is when the average cap rate for a low-rise apartment deal is 3% while high-rises are at 2.5! Just for reference, a 2.5 cap is the equivalent of a 40x multiple (aka PE or Price Earnings Ratio) on a stock meaning that it would take 40 years of earnings (NOI in the case of real estate) to repay the purchase price and that is definitely “far off in the future“.

You can see all the Canadian Cap Rate reports from Colliers here: Canada Cap Rate Report Q1 2017

Happy summer everyone-

P.S. If you’d like a handy chart for converting Cap Rates to Earnings Multiples shoot me a message with Cap Rates to Earnings in the subject line.

Are We Looking At An Extended CRE Cycle? What About Apartments?

Ed.: I’ve added the vertical lines indicating peaks in Rent Growth and Unemployment

The Bullets

  • Comparing this recovery to any other post-war is not meaningful
  • There are no statistical constraints on a real estate cycle
  • The apartment cycle will be driven by three types of demand that many underestimate

In his latest Ahead of the Curve piece, Richard Barkham, Ph.D., CBRE Global’s Chief Economist explores whether the commercial real estate cycle turns down in 2018 or  extends beyond for a year or two. His conclusion is a version of Harry Truman’s Continue reading Are We Looking At An Extended CRE Cycle? What About Apartments?

Apartment Loan Rate Update May 2017 – A Different Kind of Range

The apartment investment loan rate we track remains in the range of 4.51 – 4.92% where it’s been since the election six months ago, coming in at 4.67% this week. Now that range sure looks different than the one it was in Continue reading Apartment Loan Rate Update May 2017 – A Different Kind of Range

Apartment Investment Conditions Still Negative- NMHC Quarterly Survey

The latest NMHC Quarterly Survey of Apartment Market Conditions average remains in negative territory; marking its third consecutive quarter below 40. The average has now been at or below 50 Continue reading Apartment Investment Conditions Still Negative- NMHC Quarterly Survey

10 Year Treasury and Apartment Loan Rates Trending Down Since Last Month

The 10 year apartment investment loan rate we track has been following the T10 (10yr Treasury) lower since we reported on them last month. The T10 has fallen from 2.51% to 2.28 and the apartment rate from 4.92% to 4.7. The Treasury is back to a level last seen Continue reading 10 Year Treasury and Apartment Loan Rates Trending Down Since Last Month

Treasury Spread to the Apartment Loan Rate Opens Up

The apartment investment loan we track jumped up to 4.92% Monday, the highest level it’s seen since February 2014. The rate seems to be in an upward trend, even more so than the T10 (10yr Treasury) driven by a widening spread since the beginning Continue reading Treasury Spread to the Apartment Loan Rate Opens Up

Fewer Renters Are Working Toward Homeownership – Latest Study

1/3 of Boomers would never own a home

In the latest Freddie Mac Renter Survey out this week renter’s preferences for renting have grown since a year ago. Boomers who would never own a home jumped from just under a quarter to almost a third of respondents. Meanwhile over half Millennials Continue reading Fewer Renters Are Working Toward Homeownership – Latest Study

Apartment Investment Loans Survive Trump Inauguration

Despite the ‘interesting times’ we’ve experienced since January 20, people still need a place to live, apartments still exist to serve that need and investors can still get a loan to buy one. To borrow JP Morgan’s phrase (the banker not the bank) however, the apartment investment loan we track has continued to Continue reading Apartment Investment Loans Survive Trump Inauguration

National Multihousing Council Apartment Conditions Fall Further

The average of the NMHC’s Apartment Conditions fell to 24 from 35 with all series but Equity Financing (holding at 33) falling from last quarter. Both Market Tightness and Sales Volume came in at 25 (down from 28 and 35 respectively) while the more volatile Debt Financing fell to 14 from 38 last fall.

The Equity Financing which may be the most Continue reading National Multihousing Council Apartment Conditions Fall Further