August 2025
Closing of 72 Senior Units, in CHICO CA.
We are happy to report we closed on a $10.175M asset in Chico CA. Thanks to those of you who joined us as part of the ownership group. We secured a 5.33% interest only loan for 10 years and were able to raise rents and assert cost savings while in escrow. Our projections are exceeding a 5.5% cash on cash from the start plus significant carry forward losses in year one providing tax savings.
Have Equity to Move?
Are you interested in exchanging or investing in another project? Let us know. Send Ryan a message with your asset, approx equity and parameters and we’ll keep you informed as new opportunities arise. Currently, we have a 18.5M property in Iowa that we are doing due diligence on. We may have room for a few more partners.
The Multifamily Market in a Shifting Economic Landscape
The U.S. multifamily market is standing on the cusp of a new cycle in the second half of 2025, driven by strong demand and a structural need for housing. Despite some ongoing macroeconomic uncertainty, fundamentals remain solid. While high levels of new construction have put some pressure on the market, rent growth and occupancy rates are holding steady as new deliveries slow down.
Key Economic Indicators
Recent economic data shows some interesting trends:
Inflation: In July, the all-items consumer price index (CPI) increased by 0.2% on a seasonally adjusted basis, bringing the year-over-year increase to 2.7%.
Core CPI, which excludes volatile food and energy prices, rose 0.3% in July, after a 0.2% increase in June. The year-over-year increase for core CPI was 3.1%.
Shelter costs were a primary factor in the monthly CPI increase, rising by 0.2% in July.
Producer Price Index (PPI): The PPI for final demand jumped 0.9% in July, which was a much larger increase than economists had expected. This brought the annual rate of growth for producer prices to 3.3%. This surge in producer prices suggests that core inflation pressures are intensifying.
Interest Rates: The Federal Reserve has held rates steady in 2025, but some market observers are anticipating a modest cut later in the year. However, elevated and volatile interest rates continue to make transactions difficult to close.
Multifamily Housing Outlook
The multifamily sector is expected to see a period of stabilization and positive, albeit weaker, growth in 2025.
Supply and Demand: The national vacancy rate is projected to tick up to 6.25% in the first quarter of 2025 due to a high volume of recent completions, but it's expected to drop back down to 6.0% by the end of the year. While new supply has kept vacancy rates elevated and rent growth muted in some areas, overall demand for multifamily rentals remains strong.
Rent Growth: National effective rent growth climbed by 1.7% over the last 12 months and is projected to increase to a range of 2.0% to 2.5% for the full year.
Construction: The pace of new multifamily deliveries is slowing down, which should help to ease future supply pressures. Construction starts are expected to decline in the first half of 2025 before returning to long-term trends later in the year.
Investment: Transaction activity has reached pre-pandemic levels. The average cap rate for apartment sales has remained stable at 5.7% over the past 12 months. Investors are becoming more optimistic as demand fundamentals and interest rates stabilize.
