Investments in apartments has always been attractive for investors that prefer ownership of a physical asset versus a stock or a bond and those who understand the use of leverage to increase their yield. A review of market data indicates that the local market area still has high average occupancy levels, exceeding 95 percent and increasing average rents. However, occupancy level and average rents are below their peaks. Furthermore, as discussed in the March 28, 2017 NREI article, How Is the Price of Owning vs. Renting Affecting the Multifamily Market, the ratio of the average rent to the housing cost index remains stable. On average, the local housing price index has increased at a greater rate than the increase in average rents. This is a positive indicator for apartment owners.
The local apartment market has been very active with 16 sales last year, 18 sales in 2015 and 24 sales in 2014. The number of units per sale has ranged from a low of 10 units to a high of 936 units, with prices ranging from $399,000 to $95,250,000. The sales price per apartment unit ranged from a low of $25,000 per unit to a high of $170,000 per unit. One sale resold during this time frame with an average appreciation in price of 20 per year. It is important to note that only one apartment project sold during the first quarter of 2017.
The market has experienced an increase in interest rates, with further increases expected. Additionally, the local market has seen a significant increase in development of new apartment properties. The combination of rising rates and increased supply could have a negative impact on values of existing apartment properties.
The following table summarizes recent apartment sales in Lee County: