Apartment Sales White Hot

Going into the fourth quarter, multifamily sales have already bested 2010 total sales volume by more than $1 billion. The $33 billion in multifamily sales in the first three quarters are up 70% year-over-year compared to the first three quarters of 2010.

And the momentum is not slowing down, said Erica Champion, senior real estate economist for CoStar Group in a presentation at CoStar's State of the U.S. Multi-Family Market - Q3 2011 Review & Forecast this past week.

Still, Champion added, while it appears that the apartment investment sales market is white hot, this year's sales volume is still dwarfed by 2007 -- the peak year for investment activity. For example, in New York, Washington DC and Los Angeles, activity is only about one-third of the unusually high level of sales activity that occurred in 2007, Champion noted.

In addition, when looking at the annual sales volume of apartments compared to other commercial properties, it is actually tracking a similar share of sales compared to historical levels.

What's different this year is that more and more of the apartment sales involve nondistressed properties. The level of distressed apartment sales peaked in the first quarter of 2010 at about 29% of all sales being distressed. That percentage has dropped steadily.

The total number of distressed trades has dropped off by one-third in the third quarter alone versus the second quarter. As of the third quarter, only about 16% of apartment sales were classified as distressed.

Some markets are still working to purge distressed assets, Champion noted. For example, in Las Vegas, Atlanta, Houston, San Francisco, Chicago and Dallas, the percent of distressed sales are still relatively consistent with activity since 2009. While, in markets such as New York, Tampa, Washington DC, Los Angeles, Seattle, Denver and Northern New Jersey distressed sales seem to have run their course.

"The markets that are grabbing the most sales are on pace to crush last year's sales volumes," Champion said.

Private sellers have been the biggest net sellers this year as regional and national developers and operators are finding liquidity in the market.

Excerpt from the article written by Mark Heschmeyer entitled "Not 2007 by a Long Shot, But Apartment Sales White Hot" for CoStar.com. To view the original article in its entirety, click here.