It’s the beginning of 2024 and the numbers are in for LA Multifamily sales volume for the previous year. As many anticipated and experienced for themselves, 2023 proved to be a down year with regard to apartment sales metrics both here in Los Angeles as well as nationally. The rise in interest rates sidelined many would-be Purchasers as deals became near impossible to pencil at current prices. In addition, The Mansion Tax, which took effect in April of this past year placed inevitable downward pressure for transactions $5 Million+.
What resulted was a very wide bid-ask spread in terms of the prices that Sellers desired for their properties and the prices that Buyers were willing to pay for them – ultimately leading to sluggish transaction volume. Below is a re-cap of 2023 LA Multifamily sales metrics vs. 2022. All data is taken directly from Costar with the criteria being Multifamily Transactions 5+ Units for what Costar considers to be the LA Market (covering areas such as Los Angeles and Beverly Hills all the way to areas such as Gardena and Bellflower etc):
The Year-Over-Year LA Sales Metrics
- Total LA Multifamily Sales Volume 2023: $5.26 Billion – Total sales volume was down roughly 62% from 2022 reported Sales Volume of $13.51 Billion.
- Total LA Multifamily Number of Sale Transactions: 1,171 Transactions – Total number of transactions was down roughly 39% from 2022 reported Sale Transactions of 1,907.
- Average Price Per Unit: $280,008 – Average Price Per Unit was down roughly 22% from the 2022 reported Average Price Per Unit of $359,610.
- Average Price Per Square Foot: $334 – Average Price Per SF was down roughly 18% from the 2022 reported Average Price Per SF of $407.
- Average Cap Rate: 4.7% – Average Cap Rate was up 60 basis points from the 2022 reported Average Cap Rate of 4.1%. (Values decline as Cap Rates Rise).
Given the metrics above, it is important to note a couple things: The first is that Costar data (while directionally correct) should always be taken with a grain of salt. For instance, Cap Rates are reported for maybe half of transactions that occur, and the cap rates that do get reported are not always entirely accurate. The second is that while the report above may indicate unfavorable conditions from the previous year, we are seeing and hearing of increased optimism for 2024 given the Fed’s latest remarks with regard to interest rates. Investors want to transact and they are sitting on record amounts of dry powder (investible capital) to do just that. If you would like copies of the referenced Costar reports from which we pulled this data, please do not hesitate to reach out.
