The Canovo Report - June 26, 2024

Layton Fourplex Listed for $775k; Investment Firm Makes 2.1B Bet on Multifamily; Vineyard 18 Unit Sells for $322k Per Unit

June 26, 2024

This week in the Canovo Report…

👉  Investment Firm Makes 2.1B Bet on Multifamily

👉  Vineyard 18 Unit Sells for $322k Per Unit

👉  Median Sold Price Per SqFT for Multi-unit up 11.5% YTD

👉  Layton Fourplex Listed for $775k

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Happy Investing,

David

// NEW MULTI-UNIT LISTINGS THIS WEEK

> Our team has analyzed these deals using our custom bulk property analyzer. If you’d like more detail regarding any of these listings, click the links below.

$699,900

1475 S 900 E Salt Lake City Utah , 84105

Type: 2

Est Proforma Cap: 5.36%

Total Monthly Expenses: 1077

Gross Monthly Income: 4336

$2,400,000

325 E 1000 N Pleasant Grove Utah , 84062

Type: 13

Est Proforma Cap: 5.95%

Total Monthly Expenses: 3892

Gross Monthly Income: 16289

$775,000

1463 W 1650 N Layton Utah , 84041

Type: 4

Est Proforma Cap: 6.13%

Total Monthly Expenses: 1276

Gross Monthly Income: 5400

$999,000

261 N Center Kamas Utah , 84036

Type: 4

Est Proforma Cap: 6.40%

Total Monthly Expenses: 1682

Gross Monthly Income: 7228

$425,000

455 N 200 W Tooele Utah , 84074

Type: 2

Est Proforma Cap: 6.49%

Total Monthly Expenses: 721

Gross Monthly Income: 3114

Canovo Group may not be the listing brokerage for the above properties. The information provided is not guaranteed and should not be relied upon to make investment decisions. Buyers should complete their own analysis and due diligence before making any investment.

// SOLD MULTI-UNIT LISTINGS LAST WEEK

> Here's a roundup of multifamily properties sold over the past week. We've estimated their selling cap rates using our bulk analyzer.

// FAIR MARKET RENT RATES

> Below you will find the current Fair Market Rents for each Metropolitan Area in Utah as published by HUD.

Fair Market Rents, as defined in 24 CFR 888.113 are estimates of 40th percentile gross rents for standard quality units within a metropolitan area or nonmetropolitan county.

// UTAH MARKET SNAPSHOT

> Utah Multi-Unit (2+ units): Sold Listings & Price Per SqFt

  • The median sold price per sq ft for multi-unit property is up 11.56% year to date going from $227 last year to $254.

  • The total number of multi-unit properties sold is up 14.01% year to date going from 207 last year to 236 ytd.

> Utah Residential Homes: Sold Listings & Price Per Sq Ft

  • The median sold price per sq ft for single family homes is up 4.44% year to date going from $222 last year to $232.

  • The total number of single family homes sold is down .21% year to date going from 16,870 last year to 16,905 ytd.

Source: wfrmls

// INTEREST RATES & FINANCING

> Mortgage Rates as of 6/25/2024

Sponsored by: Spencer Allen | Trillion Mortgage NMLS #2296408

// TOP HEADLINES, REPORTS, & INSIGHTS

One of the countries top investment firms, KKR, has made a significant investment in the U.S. residential market by purchasing a vast apartment portfolio worth $2.1 billion from Lennar’s multifamily division, Quarterra. This deal includes 18 Class A properties across key growth areas in the U.S., emphasizing KKR's confidence in the multifamily sector despite recent market challenges.

Main takeaways:

  • Strategic Acquisition: The acquisition spans over 5,200 units in high-demand coastal and Sun Belt markets, including states like California, Texas, and Florida.

  • Market Conditions: This move comes at a time when the apartment industry has seen a record number of openings, potentially pressuring valuations due to increased supply.

  • Management and Future Outlook: KKR will collaborate with experienced multifamily operators to manage the properties, signaling a robust approach to tackling the current dislocations in commercial real estate markets.

This purchase is part of KKR’s broader strategy to capitalize on favorable long-term trends in high-growth metropolitan areas, despite short-term fluctuations in the market.

Economic analysis reveals a concerning trend in the housing market, with significant declines in homebuilding and consumer spending potentially affecting broader economic stability.

Main takeaways:

  • Decrease in Home Sales and Starts: April's single-family home sales fell by 7.7% year-over-year, with housing starts also showing a notable decrease of 5.5% between April and May. This trend is largely attributed to fading housing demand.

  • Significant Cuts in Multifamily Developments: The sharpest decline has been in multifamily property starts, which plummeted by 51.7% year-over-year in May, marking the lowest pace for apartment construction since April 2020.

  • Impact on Consumer Spending: Despite a boost from pandemic savings and high net worth, consumer spending growth has slowed, with retail sales underperforming expectations. This could pose further challenges if inflation and interest rates continue to suppress economic activity.

The "State of the Nation's Housing 2024" report by https://www.jchs.harvard.edu/ reveals a critical situation in the U.S. housing market, with escalating costs affecting both homeowners and renters and influencing broader economic conditions.

Main takeaways:

  • High Costs Deter Homebuyers: Increased home prices and interest rates have led to a downturn in homebuying, especially among first-time buyers, with the homeownership rate only marginally increasing in 2023.

  • Renters Facing Increased Burdens: A record high number of renters are spending over 30% of their income on housing, highlighting a deepening affordability crisis that has been exacerbated since the pandemic.

  • Construction Trends: While there has been a surge in multifamily unit completions, helping to moderate rent increases, the supply of for-sale homes remains critically low due to a reluctance among current homeowners to sell, partly due to favorable existing mortgage rates.

The report stresses the need for comprehensive action from all sectors to address the housing affordability crisis, manage the risks posed by climate change, and tackle the record-high levels of homelessness.

Utah is on the brink of a significant affordable housing shortage as numerous low-income housing units are set to exit a federal subsidy program, potentially driving up rents and exacerbating the state's housing crisis.

Main takeaways:

  • Expiring Subsidies: Hundreds of affordable housing units in Utah are aging out of the Low-Income Housing Tax Credit program, threatening to convert these units to market rates within the next few years.

  • Impact on Residents: Residents like Ivette Vickory from Millcreek face uncertain futures as their rents could increase significantly, forcing them to consider relocating despite decades in their community.

  • Statewide Challenges: The potential loss of these affordable units comes amid a broader 42% reduction in rentals under $1,000 statewide from 2012 to 2022, putting additional pressure on an already strained housing market.

I hope you found this weeks report valuable. If you have any questions, feedback, or if I can serve you in any way, don’t hesitate to reach out!

David Robinson

Principal Broker/Managing Partner

> Whenever you’re ready there are a few ways I can help you:

1. Buy Off-Market Multifamily Properties:Skip the competition and discover exclusive off-market multifamily properties tailored to your investment goals.

2. Broker's Opinion of Value:Curious about your property's worth? Request a free, no-obligation valuation of your rental property.

3. Discreet Private Sale:Prefer a simple, private transaction? Offer your multifamily property discreetly to member’s of our investor database and minimize broker commissions.

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