View this email in your browser

Medawar Market Musings | October 2024

Where does the apartment market go from here?

We are entering the slow season for apartment leasing. Along with many of my colleagues and competitors that I speak with we are seeing a significant drop off in leasing activity, as is typical for this time of year. People generally change their housing situation in the spring and summer and stay put during fall and winter. We see this consistently every year in the single family home sales market and in the rental housing market. We are offering one month free rent concession on most of our new leases, reducing rent increases on renewals, and doing our best to alter leases that end in the winter to end in the spring or summer upon renewal.

The good news is the apartment sales market appears to have bottomed. The Simon | Anderson Multifamily Team at Kidder Matthews put together this great table showing that building sales and volume sales have increased compared to the prior quarter and comparable quarter in prior year.  

In Seattle rents are up 1% year over year and the vacancy rate has ticked downward. At 5.7% the overall vacancy rate for Seattle is stable and at a healthy level in line with historical averages. At Medawar Real Estate we average a vacancy rate between 2% and 3% because our units are fixed up and we have strong leasing processes.

Again from the Simon | Anderson Multifamily Team at Kidder Matthews:

A key theme in apartment investing over the last few years was battling expense increases. Utility rates were increased 3.5%, obtaining property insurance has become extremely challenging and costly, and property taxes have consistently increased over time. We are at least seeing some relief on the property tax front. Our assessed values for 2025 are coming in lower than 2024 on almost all of our buildings which should lead to a reduced property tax bill in 2025. Will our government respond to lower valuations by increasing property tax rates again? I’m guessing yes, but at least we should see some relief on property taxes in the near term.

With vacancy rates at reasonable levels, construction activities almost drying up, hope on expenses, and rebounding sales levels, right now is starting to feel like the bottom of the apartment market and a good time to be buying before we return to another up cycle.

The Kidder Matthews team who provided the two charts above puts together a very comprehensive report on the market each quarter. Send me a note if you’d like me to share the full report.

More charts