We dive deep into multifamily real estate trends, current market conditions, and investment opportunities. They discuss everything from interest rates, gross rent multipliers, and the shrinking pricing gap between neighborhoods in Long Beach, to new laws impacting property owners. Learn how to navigate the real estate market and where the best opportunities lie in 2024
Market Trends in Long Beach: A Neighborhood Pricing Shift
Cody shared fascinating insights into Long Beach’s real estate market. By analyzing data from 2022 and 2024, he uncovered a notable trend: the pricing gap between high-end (A class) neighborhoods, such as Alamitos Beach (ZIP 90802), and workforce housing areas (C class) like ZIP 90813 has significantly narrowed.
- In 2022: A-class properties sold at 16.6 times gross rent multiplier (GRM), while C-class properties were at 14 GRM.
- In 2024: A-class GRMs dropped to 11.7, while C-class fell to 10.8.
This narrowing gap indicates a sharper decline in A-class pricing, presenting an opportunity for investors looking to acquire in prime locations at discounted metrics. However, the higher sale prices in A-class neighborhoods still require deeper pockets, often a million-dollar difference compared to C-class properties.
Interest Rates and Their Impact on Multifamily Properties
The conversation shifted to interest rates, a critical factor affecting property values. Cody explained that financing for five-plus unit buildings often involves short-term fixed loans, which have become costlier with rising interest rates. This shift has pressured sellers in A-class areas, leading to steeper price drops compared to their C-class counterparts.
Both Juan and Cody agreed that the current environment offers an opportunity for savvy investors to purchase in prime neighborhoods before interest rates decline further and competition intensifies.
Policy Watch: Laws and Propositions Impacting Real Estate
- Balcony Inspection Law (AB 2579): The California law requiring balcony and stairwell inspections for multifamily properties (three units or more) has faced implementation challenges. Many property owners remain unaware or unprepared, leading lawmakers to propose extending the compliance deadline from January 1, 2025, to January 1, 2026.
- Prop 33: Justice for Renters Act: This initiative aims to repeal the Costa Hawkins Act, a cornerstone law limiting rent control in California. If repealed, cities could impose stricter rent control measures, including vacancy control and rent caps on single-family homes and new construction. Both Juan and Cody urged listeners to vote “No” on Prop 33, emphasizing that statewide rent control already exists and repealing Costa Hawkins could stifle investment and housing development.
- $25,000 Down Payment Assistance Proposal: A new proposal from Vice President Kamala Harris offers first-time homebuyers $25,000 in down payment assistance. While this sounds appealing, Cody warned that such programs could drive up entry-level housing prices, exacerbating affordability issues instead of solving them.
ADUs: A Small but Powerful Solution
Juan and Cody highlighted Accessory Dwelling Units (ADUs) as a promising opportunity for property owners. ADUs not only increase housing supply but also boost property values and rental income. Recent legislative changes may even allow more units to be added to eligible properties, making ADUs a viable option for investors looking to maximize their returns.
Advice for Buyers and Sellers
- Buyers: Act now before interest rates drop further and competition heats up. Focus on prime locations with steep price reductions for long-term value growth.
- Sellers: Monitor interest rate trends closely. Lower rates could attract more buyers and improve sale prices.
Interested in expanding your real estate portfolio or selling a property? Our team specializes in multifamily investments and provides in-depth market analysis to help clients succeed. Please reach out if you have any questions or need assistance.
