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At the end of 2023, respondents expected apartment starts to diminish by 44% on average over the next 12 months. As of Q2 2024, the expectation is that starts will remain roughly unchanged (-1%) over the next 12 months.
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Yet, 64% of developers said they do not plan to start any projects over the next six months.
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The number of developers signaling that development financing is becoming easier to secure is minuscule but increasing (8-9% for equity and debt financing, up from 4-5% last quarter, respectively.)
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Challenges in obtaining financing and a persistent gap in pricing expectations between sellers and buyers continue to keep most investors on the sidelines. Just 7% of investors acquired properties within the last six months, while 31% intend to acquire properties within the next six months, down from 39% at Q1 2024.
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A majority of investors (56%) reported apartment communities are either somewhat or very overpriced.
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Over half (62%) of investors expect prices to grow in the coming year, though a sizeable minority (31%) anticipate declines. Price appreciation is expected to be modest during the next year as well, with an average predicted increase of 2.0%.
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Despite a lack of consensus on values, most respondents expect cap rates in the 5.0% to 5.5% range for well-maintained, well-located and stabilized apartment buildings.
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All apartment operators in the Northwest and Northeast stated that 2024 apartment demand is either meeting or exceeding expectations coming into the year. In stark contrast, 43% of respondents in Texas indicated it is weaker than anticipated.
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Nearly three out of every four apartment operators expect rental demand to remain roughly the same through the end of the year.
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Compared to earlier this year, the plurality of operators in both the Midwest and Florida have increased their expectations for rent growth in 2024, while more than one-third of them in Texas and the Southwest have decreased.
NAA is pleased to partner with John Burns Research and Consulting on this insightful sentiment survey. To participate in the Q3 2024 survey, reach out to Paula Munger, NAA’s VP of Research, at [email protected].