Q1-2024 Market Data
Hampered by the hurdles that investors are facing such as the increase in costs to financing, construction, and insurance, sales volume in Q1-2024 totaled $11.2M, a significant decrease of 65.19% as compared to the Q4-2023 sales volume of $32.17M.
The median price per unit decreased QoQ by 26.99% or $68K/unit to $183K and the average CAP rate increased 73 basis points from 3.92% to 4.65% signaling downward pressure on value. The increase in CAP rate brings the “market cap” in line with the 10-year treasury yield which is at 4.59% as of this writing. Every deal that has traded during Q1-2024 possessed a value-add component and as such traded at a higher CAP rate.
Download Sales Comp Below
Current Inventory Snapshot
There are currently 40 properties on the market equivalent to $182M in opportunities. 5 of the properties are in escrow. The average days on market is just over 5 months at 153 days. The average CAP rate of deals listed is 3.98% a 61 basis point spread between the 10-year treasury yield (4.59%) and the average listed CAP rate and a 67 basis point spread between where deals are trading.
To receive our Hawaii Multifamily Inventory Sheet, which compiles all active listings as well as off-market opportunities into one convenient document, simply reply to this email requesting to be added to the distribution list.
Given the ever-changing nature of the market, your property acquisition criteria may have evolved. Please take a moment to fill out our 2024 Buyer Criteria Survey to ensure we tailor our offerings to match your preferences.
May Fed Decisions
In an anticipated move, the Federal Open Market Committee (FOMC) announced during its May 1st meeting that it would maintain its benchmark short-term borrowing rate in a range of 5.25% - 5.50%. The Fed has elected to hold interest rates steady since July 2023. While the fed funds rate has likely reached its ceiling for this tightening cycle, questions remain about the precise timing and extent of potential rate cuts in 2024 as they continue to stave off stubborn inflation. Given that we’re moving closer and closer to an election, it’ll be a surprise if we will see a rate cut by the summer months.
Asset Management Tip –Insurance Trends
The insurance market has become very conservative, especially when it comes to insuring apartment buildings in Hawaii. There are even some insurance providers exiting Hawaii’s market entirely. For perspective, the last insurance quote that was shared was 4X greater than the current premium. Given that many of the properties were constructed in the 60’s & 70’s there are many buildings that have failed to catch up on deferred maintenance such as their plumbing, roof, and spalling projects, to name a few, resulting in higher premiums. It’s recommended for owners to not only shop their insurance, but also, do their best to conduct a thorough risk assessment of the property to identify potential hazards and liability.
Multifamily In the News
HB 2090 Passes Allowing Housing In Commercial Zoned Areas
SB 3202 Passes "Missing Middle" Housing Bill
Gov. Green, Officials Backing Stadium Project
Honolulu Officials Say Lack of Land, City Subsidies Hinder Affordable Housing
A Low-Income Housing Complex Is Ready To Rebuild After Lahaina Fire
Networking Events
CCIM Lunch & Learn May 7th – Commercial Property Insurance
CCIM Sunset Cruise Networking Event
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