While deal activity decelerated significantly due to uncertainty at the onset of the COVID-19 outbreak, multifamily investment sales volume has been trending upward, as quarter-over-quarter transaction volume rose 55.9% in 3Q20, the strongest sequential quarter-over-quarter gain since 2011.
Rent collections for multifamily continue to outperform other major property types, with 94.4% of rent payments collected in 3Q20. Collections during the pandemic have varied geographically, with densely populated markets suffering more than others due to the nature of the virus.
Multifamily total returns fell to 0.8% year-to-date, marking the lowest annual rate of return since 2009 during the Global Financial Crisis (GFC). Despite this drop, historical annualized returns for multifamily assets have shown the ability to rebound sharply following an economic downturn.
Over the past 12 months, annual effective rent growth dropped to 1.0%, the lowest annual rate since 4Q10. Despite many markets showing muted growth because of the economic downturn, several markets continue to outperform, with six of the top ten markets for rent growth located in the Sunbelt.
Supply and Demand
250,656 units have been delivered year-to-date through 3Q20, outpacing demand by 31,569 units. Over the past 12 months, demand has been strongest in Dallas, Atlanta, and Houston, while Sacramento saw demand outpace new supply.
Mortgage debt outstanding remained flat quarter-over-quarter at $1.6 trillion, with almost half of outstanding debt coming from the GSEs. Year-to-date, Fannie Mae and Freddie Mac have originated a combined $97.4 billion.