Multi-Family Market

Newly listed investment properties posted a healthy increase over the same period in 2018 – the highest in the past 3 years. Still, demand is strong with no sign of letting up as properties are closing in less than 2 months from listing.

Long term investors, interested in realizing their gains, are opting to part with portions of their portfolios contributing to the uptick in inventory levels. If the supply of newly listed properties continues on this trajectory, we should see stabilization or growth in sales for the remainder of 2019.

Investors that are new to the market – or first-time buyers who may be challenged with affordability in Chittenden County, may want to consider multi-family properties in cities to the north and south, like Vergennes or St. Albans. “Owner – occupying” part of the property while a tenant contributes to your mortgage payment is a great way to achieve your dream of home ownership and to build equity.

The super-hot investor market shows no sign of letting up as the number of properties sold increased by 19% while inventory remained scarce. Low supply and heavy demand pushed the median sale price up nearly 14% across the market.

Chittenden County, accounting for 68% of the total multi family sales in northwest VT, saw an average sale price of almost $520,000 – driven by some high-priced sales in Burlington. Some long-time investor owners are deciding to part with portions of their portfolio to realize price gains – while new investors to the market need to be well qualified and ready to act if an opportunity presents itself.

Despite newer apartment complexes becoming available over the last couple of years- and a number of new projects on the horizon – the vacancy rate for rentals remains low as compared to the national average. Demand from renters remains strong likely due to the shortage in inventory for first time home buyers – and the demand of college students in downtown Burlington. Positive job growth in Chittenden County also contributes to the strong demand.

Investors continue to demonstrate strong demand for multi-family properties especially in Chittenden County which represents 67% of the properties sold in the region.

The median and average sale prices soared across Chittenden, Addison and Franklin Counties as supply could not keep up with demand.

A few high-priced sales in Burlington, earlier this year, pushed the average sale price to over $500,000.

Historically low vacancy rates in the greater Burlington area may have eased slightly with the construction of newer apartment buildings, however continued renter demand across the region makes real estate a good choice for savvy investors.

Investors continue to show strong demand for multi – family properties especially in Chittenden County which accounts for 65% of the total units closed in northwest Vermont during the 1st six months of the year.

The number of properties listed during the time frame dropped more than 16% and, since 2015, the properties available has declined 38%. Limited inventory coupled with the demand pushed the median price of multi-family homes up 11% across the region and 13% in Chittenden County. A few high-priced sales in Burlington drove the average sale price up to more than $575,000. Despite the building of newer apartment complexes and a slight easing of the historically low vacancy rate – demand is still high from renters. Amenities included in the newer complexes are appealing to tenants – however, these units may come with higher rents. Therefore, investors seek out opportunities by purchasing more traditional, multi-family buildings or single-family properties in neighborhoods to meet the pent-up demand.

The multi-family market showed a healthy increase in the median price sold and a big jump in the average price sold – driven largely by some high priced sales in Chittenden County.

With 24 closed transactions in Chittenden County during the 1st quarter and only 53 properties available during that time, the market remains competitive for investors. Although the days on the market from list to close increased over the same period last year, this still represents only 3.5 months on the market for closed properties- indicative of a typical “seller’s market”. Newer apartment complexes coming online have eased the historically low vacancy rate in the greater Burlington area a bit, however there is still strong demand from renters.

Multi-family properties are moving quickly in population hubs such as Burlington and Winooski, where the number of days from listing to closing is now 66. 

Despite a 6% increase in units for sale across northwestern Vermont, new inventory remains tight in these key cities. Overall, the multi-family market is tight.

A 4% decline in units sold in 2016, twinned with a couple of higher-priced sales, resulted in a near 10% dip in median sales prices across northwestern Vermont for 2017. This reflects a shift in available inventory, not necessarily a decline in property values.

The number of multi-family properties sold decreased by nearly 4% in 2017, but the number of newly listed units on the market was up by more than 6% — to 225 in all four counties.

Rents have been high in northwestern Vermont, but landlords are starting to feel a pinch as newer multi-family options have become available since 2015, causing a shift in historically low vacancy rates in the area.

Sales and prices of multi-family properties in all four counties have been soft through 2017, but there were significant and strong signs of improvement in the third quarter — especially in Chittenden County and its population centers.

The number of multi-family properties sold in Q3 increased by 12.5% with the average sale price increasing by 4%. Our Realtors have noticed that optimism over recent Burlington development projects, such as the redevelopment of the Burlington Town Centre, has generated interest from out-of-state investors — from New York City and Boston, more specifically — who want to diversify their portfolios with affordable multi-family properties. The quick movement of well-maintained, well-located multi-family properties has produced multiple offers in many cases.

Finally, our Realtors have noticed that buyers who are priced out of the single-family housing market are investing in owner-occupied duplexes; this way, they can still own a home while putting their tenant’s rent toward their mortgage.

The Multi-Family market, largely driven by Chittenden County, is experiencing similar trends as the residential real estate market: steady buyer demand, tempered by lower inventory levels.

Over the past year, historically low vacancy rates have eased a bit. However, Investors continue to show strong demand for multi-family properties given the growing and diverse professional base and expanded hiring by local institutions and businesses – both positive trends in the market.

The decline in average and median sold prices is a result of less properties sold in 2017 coupled with a multi-million dollar sale in 2016 which has a strong effect on the data. The decline is not a result of depreciation.
Our agents report that larger, high priced properties are not coming to market as investors choose to hold on to those properties.
With well positioned, multi-family units selling quickly – some buyers are considering single family homes in renter friendly neighborhoods as an investment.

The Multi-Family market, largely driven by Chittenden County, is experiencing similar trends as the residential real estate market: steady buyer demand, tempered by lower inventory levels.

Over the past year, the historically low vacancy rate has eased a bit, however, Investors continue to show strong demand for multi-family properties given favorable trends such as a diverse professional base, consistent hiring by local institutions and businesses, and the delay of millennial buyers saddled with student loan debt to purchase their first home.

The decline in average and median sold prices is a result of a small number of properties sold in the 1st quarter of the year coupled with a high-priced property sold in 2016 which has a strong effect on the data. The decline is not a result of depreciation.

Our Agents report that larger, high-priced properties are not coming to market as Investors choose to hold on to those properties.

With well-positioned, multi-family units selling quickly – some buyers are considering single-family homes in renter-friendly neighborhoods as an investment opportunity.

Chittenden County’s multi-family market is experiencing similar trends as the residential market: steadily increasing buyer demand, tempered by lower inventory levels in the biggest markets for investment properties, such as Burlington and Winooski.

Investors have historically been attracted to Chittenden County’s multi-family properties because of the favorable investment trends, such as a strong return-on-investment given the area’s steadily rising rents and low vacancy rates.

During 2016, vacancy rate eased to 4.4%, compared with the last decade’s more typical 1-2%, in response to almost 700 new apartments coming on line during the past year. Nevertheless, our Agents report that investors continue to show strong demand for multi-family properties, given favorable trends such as a growing and diverse professional base and expanded hiring by local institutions and businesses such as University of Vermont and growing technology industry.

The higher vacancy rate has prompted some landlords to offer incentives such as flexible leases or to negotiate rents. Because of the changing rental landscape, our Realtors expect inventory levels to ease in 2017, as some property owners may decide to list their multi-family properties.

In 2016, 134 multi-family properties changed hands from a year earlier, with properties selling for 15.3% higher on average. As always, our Realtors are noting that well-priced properties in desirable locations quickly attract buyers.

With demand from buyers remaining far ahead of supply, our Agents note that owners of multi-family properties may want to consider listing to take advantage of the market dynamics.

The following are details about trends impacting the multi-family market:

Tighter inventory for Burlington, Winooski

New listings in Burlington, which is the most active town for multi-family homes, declined by 9% last year, while new listings in Winooski slumped by 42%. Both cities are popular with renters, which is sparking investor interest in these towns.

Rents may be little changed in 2017

With almost 700 newly built apartments coming online last year in Chittenden County, landlords may be entering a period of “minimal to no overall rent increases,” according to real estate consulting firm Allen & Brooks.

Rental demand is likely to continue

Empty nesters may spur rental demand from people between 55 to 64 years old, while Baby Boomers may look for senior housing targeted to the 55+ demographic, according to Allen & Brooks. The 25-34 age group is also projected to grow by 8.5% between 2015 to 2020, which may add to demand for rental properties.