Interest rates are to blame as investors who scooped up multifamily buildings throughout the early years of COVID-19 pull back, according to a new report.

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The volume of apartment sales fell in the first three months of the year at the fastest rate since the middle of the great financial crisis and to one of the lowest volumes since 2012, according to a new report.

The value of apartment buildings that were sold to investors fell by 74 percent in the first quarter, according to data from commercial real estate portal CoStar, as first reported by The Wall Street Journal. Sales volume fell to $13.9 billion in the quarter, down from $54.1 billion a year earlier.

Unlike during the Great Recession, when subprime mortgages were at the heart of a widespread real estate slowdown, a quick rise in interest rates is to blame.

The interest rates have gone up so much that the math just doesn’t work out there the way that it did a year and a half ago,” said Chris Salviati, senior housing economist with ApartmentList.

Not counting the onset of the COVID-19 pandemic, when virtually all real estate transactions skidded to a halt before picking back up at rapid pace, the quarter saw the lowest volume of apartment sales since 2009, according to the report.

The slowdown was even more pronounced when compared to the peak in the fourth quarter of 2021, when there were $115.5 billion in apartment sales, indicating sales have fallen 88 percent from the peak. Aside from the beginning of the pandemic, apartment sales volume hasn’t been as low since the beginning of 2012.

The price of multifamily buildings fell 8.7 percent in February compared to a year before, citing the MSCI Real Assets pricing index, The Wall Street Journal reported.

Paired with the higher cost of financing after a series of sharp interest rate hikes by the Federal Reserve, there’s a type of ongoing standoff between apartment buyers who are hoping to see prices fall to meet the current financial landscape and sellers who are facing a loss of missed investment targets.

Industry experts expect investors who bought with variable interest rates and a high amount of debt to have troubles throughout the year. Some may be forced to sell.

“If sellers aren’t adjusting the prices they’re willing to accept and the buyers aren’t there at those levels, what you’re just going to see is a very small volume of transactions which is basically what we’re seeing,” Salviati said., which tracks national apartment price trends, reported rent growth in March was 2.6 percent higher than a year earlier. That’s actually closer to typical seasonal partners, the company said. But it’s expected to keep slowing through the summer.

Email Taylor Anderson

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Editor’s note: This story has been updated to accurately reflect the rate of the sales decline.

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