The Santa Monica apartment market has “reached a true peak,” according to less-than-sunny forecast by multifamily brokerage firm Stepp Commercial.
Overall sales volume for multifamily units in the city dipped 37 percent between the third quarter of 2015 and the same period in 2016, while dollar volume was down by 42 percent year-over-year, a Stepp report found.
“Properties are languishing on the market longer and the myth of the ‘foreign investor’ who is buying up everything at over-market pricing is simply not happening,” the report said. “We expect that prices will hold steady or soften in 2017 as the dramatic increases in rents slow from previous years.”
While there was a third-quarter increase in the average price per unit — from $414,178 in 2015 to $494,648 last year — the average price per property actually dropped from $5.3 million in 2015 to $4.3 million in 2016. And a 6 percent increase in price per square foot, from $460 in 2015 to $527 in 2016, is also marginal compared to previous year-over-year leaps, which have been as much as 29 percent.
Stepp projects that the market has topped out and may even begin to turn in buyers’ favor in 2017, especially if interest rates go up substantially.
“If the interest rates will grow further — and they will — these numbers are going to be squeezed even more,” Kimberly Roberts Stepp, co-founder of the brokerage, told TRD. “That’s why prices will go down; sellers will have to come to the reality that no one is going to pay more than $500,000 or $600,000 on a unit.”
Still, Stepp predicts that sales volume will remain steady in 2017.
“There’s nothing to be concerned about — having a SaMo property is still an awesome investment,” she said, pointing to a new report from Apartmentguide.com that names Santa Monica as the the priciest rental market in America. “The market’s just going to have to correct itself.”