Multifamily Sales in Los Angeles Year to Date

There were 700 for the first five months of the year (avg. 140 per month), on

route to 1,680 for the year, which is only slightly higher than 2023s 1,629 total of 4+ unit sales.

However, sales transactions are still ten percent lower than the same time

last year (Jan to May 2023 -767-per costar) and significantly lower than total

transactions in 2022 (2,000) and 2021 (3,000).

While sales have been on roughly on par to last years,

listings have increased in Los Angeles, most likely motivated

a desire to exit the market due to increased regulation,

operating costs, and the upcoming justice for renters act

on the November ballot.

FOLLOWING THE MONEY: WHERE ARE

INVESTORS BUYING?

? Non RSO markets (South Bay communities, Orange

County, San Diego County)

? Non RSO properties (built post 1978 in Los Angeles)

? Newer construction properties that can be acquired

for less than replacement cost (1980s-1990s

construction properties)

? Out of state, particularly Republican controlled sunbelt

states (Arizona, Nevada and Texas) being amongst the

most popular states for CA investors to exchange into.

CAPITAL MARKET SUMMARY

While inflation has slowed it hasn’t decreased enough for

the FED to warrant additional interest rate cuts.

INTEREST RATE INDEXES

Index 6/3/2024 5/3/2024 6/3/2023

3-YR TREASURY 4.69% 4.64% 4.14%

5-YR TREASURY 4.51% 4.49% 3.84%

7-YR TREASURY 4.51% 4.49% 3.78%

10-YR TREASURY 4.40% 4.50% 3.69%

1-MO SOFR 5.33% 5.35% 4.85%

10-YR SOFR 4.12% 4.12% 3.44%

CURRENT CRE LOAN RATES

Spread Index Rate

LIFE COMPANY 135-220 BPS 10-Yr T 5.75-6.60%

CMBS 300-400 BPS 10-Yr SOFR 7.12-8.12%

APT. AGENCY 150-300 BPS 10-Yr T 5.90-7.40%

BANK/CREDIT

UNION 5-yr Rate N/A 6.25-7.25%

PRIVATE BRIDGE 275-775 BPS 1-Mo SOFR 8.08-13.08%

SBA - BANK 2.00-3.25% Varied 6.50-7.00%

SBA - SBA N/A N/A 6.58%

Increased interest rates for listed and sold properties

have been reflected in most SoCal markets with limited

exceptions (West Los Angeles submarkets (90024, 90025,

90049, 90048, and 90035) being one where cap rates

have maintained in the four percent range) in most other

markets, cap rates have expanded to the 5 to 7 percent

range depending on the submarket.

Insurance premiums continue to rise because of insurers

pulling out of the market; however, most recently some

have returned to the market (Farmers Insurance) . Older

properties (50 years and older) have seen their premiums

2 to 3x their previous premium.

While market rate rental demand has cooled from its peak

level in the summer of last year, housing voucher programs

such as HACLA and others have offered competitive rental

payment standards to incentivize owners to take voucher

holders. For example, a one-bedroom voucher in South

Los Angeles can command as much as $2,407 a month.

Developers with maturing construction loans have felt

pressure to sell, which has been challenging at a time where

demand for market rate and luxury apartments have waned

in most markets (West Los Angeles again being the outlier).

Projects completed (but not fully leased) and incomplete

projects alike have been listed on the market with intent to

return investor capital and/or mitigate losses.

If you are in the market to buy or sell

apartment buildings in Southern

California, or need vetted vendor

recommendations, don’t hesitate to

contact a member of our team.