Vermont Multi-Family Real Estate Market Report

Multi-Family
Median Sale Price:	Average Sale Price:	Units Sold:
$274,000 (-13%)	$329,430 (-7.1%)	101(-1.9%)

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.

Multi-Family
Median Sale Price:	Average Sale Price:	Units Sold:	Newly Listed:	Days on Market:
$274,500 (-22.84%)	$319,358 (-13.26%)	56(-12.5%)	114 (+3.64%)	108 (+31.7%)

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.

Multi-Family
Median Sale Price:	Average Sale Price:	Units Sold:	Newly Listed:	Days on Market:
$285,000 (-18.9%)	$296,039 (-24.3%)	27(-3.6%)	50	64 (-27%)

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.

County Averages
Average Sale Price:	Units Sold:	Days on Market:
$386,796 (+15.3%)	134 (+11.7%)	88

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.

Multi-Family Averages
Median Sale Price:	Units Sold:	Days on Market:
$290,000 (+1%)	91 (+3%)	162 (+5%)

As with the residential market, the multi-family market is witnessing strong demand tempered by lower inventory levels. That’s pushing up pricing in some markets, especially sought-after towns such as Burlington.

The vacancy rate in Chittenden County has eased somewhat from record low levels in previous years, although it still remains below the national level. At the same time, local businesses such as Dealer.com and GE Healthcare continue to hire, bringing professionals into the region. Those dynamics are supporting a vibrant market for rental properties, which in turn draws investors to the multi-family investment market.

During the first nine months of the year, 91 multi-family properties were sold, little changed from a year earlier. Our Realtors note that demand has been tempered by fewer new listings coming on the market, which is limiting the available inventory of investment properties. Because of that, well-priced properties in desirable locations are selling quickly.

Inventory continues to be tight in Burlington and Winooski, with the latter experiencing a surge in interest from renters because of its revitalized downtown area, which has brought new restaurants and shops to the former mill town. New listings in Burlington, which is the most active town for multi-family homes, have declined by 13% this year.

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:

Tight Inventory for In-Demand Towns

New listings in Burlington, which is the most active town for multi-family homes, have declined by 13% this year. Our Realtors are also witnessing tight inventory levels in Winooski, which is drawing more interest because of its revitalized downtown.

The Vacancy Rate Continues to be Low

The rental market’s vacancy rate stood at 2.1% in Chittenden County in June, according to real estate consultancy Allen & Brooks. That’s significantly higher than the rates seen in 2010-2014, when it averaged about 1.4%. While rents are stabilizing as a result, that hasn’t impacted demand or pricing for multi-family properties as the region’s vacancy rates are substantially lower than the roughly 4.5% national rate.

Rents are stabilizing

Younger buyers with student loans may end up in the rental market for more years than older generations because of their loan repayments. Allen & Brooks is also forecasting increasing demand from seniors for rental housing, as many decide to scale down and sell their single-family homes.

Multi-Family Averages
Median Sale Price:	Units Sold:	Newly Listed:	Days on Market:
$360,000 (+16.1%)	63 (21.1%)	113 (-9.6%)	79

The multi-family property market in Northwest Vermont continued to show robust trends in the first half of 2016, thanks to the region’s low vacancy rate and growing professional population. The multi-family market is continuing to draw out-of-state, international, and local investors because of these trends, according to our Agents. 

Across the four counties, 63 multi-family properties changed hands during the first six months of the year, an increase of 21.1%. The median sales price rose 16.1% percent to $360,000. As with the residential market, tight inventory remains an issue for the market, with demand exceeding supply. Because of these dynamics, well-priced, well-located properties are selling quickly.

Inventory remains especially tight in Burlington and Winooski, with the latter experiencing a surge in interest from renters because of its revitalized downtown area, which has brought new restaurants and shops to the former mill town.

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:

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Tight Inventory in Winooski and Burlington

A lack of inventory continues to be an issue in both Winooski and Burlington. The number of newly listed properties slipped 36% in Winooski and more than 10% in Burlington.

A Slightly Higher Vacancy Rate

The rental market’s vacancy rate stood at 2.1% in Chittenden County in June, according to real estate consultancy Allen & Brooks. That’s significantly higher than the rates seen in 2010-2014, when it averaged about 1.4%. While rents are stabilizing as a result, that hasn’t impacted demand or pricing for multi-family properties as the region’s vacancy rates are substantially lower than the roughly 4.5% national rate.

New Apartment Construction

Builders are responding to demand, with more than 600 new apartment units slated to be built this year, according to Allen & Brooks. Although newly constructed units tend to have higher rents than properties in existing properties, the added inventory may stabilize rents across the region.

Demand for rental housing is likely to remain strong, partly because median household incomes still haven’t caught up with their 2008 peak. At the same time, single-family homes have appreciated in value, making them more expensive for first-time homebuyers. Younger buyers with student loans may end up in the rental market for more years than older generations because of their loan repayments. Allen & Brooks is also forecasting increasing demand from seniors for rental housing, as many decide to scale down and sell their single-family homes.

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Multi-Family Averages
Median Sale Price:	Units Sold:	Newly Listed:	Days on Market:
$351,000 (+12.3%)	29 (45%)	39 (-30.4%)	84

With an extremely low vacancy rate and a growing and diverse professional population, Northwestern Vermont continues to draw local and out-of-state investors to its multi-family property market.

Across the four counties, the number of sales jumped 45 percent, while the median sales price gained 12.3 percent to $351,000 during the first quarter. Our agents are finding that well-priced, well-located properties are selling quickly, especially given the tight inventory for these homes.

Inventory remains an issue for the multi-family market, given that there’s more demand from buyers than can currently be met by sellers, especially in Burlington and neighboring Winooski. Given the interest from investors, our agents note that it’s an excellent time to list multi-family properties for sale.

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

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Winooski Remains Attractive

Investors continue to search for multi-family properties in this revitalized mill town, thanks to demand from professionals who like the atmosphere and lower costs than Burlington. Multi-family sales in Winooski rose to 5 transactions in the first quarter compared with 3 a year ago. A lack of inventory continues to be an issue.

Higher Vacancy Rate

The rental market’s vacancy rate has seen some easing in recent months due to new apartment building construction. In December the rate stood at about 3 percent in Chittenden County, or almost double the rate from a year earlier. Our Realtors note that it hasn’t impacted pricing for multi-family properties, although rents are stabilizing.

Burlington Shifts to Lower Price Points

In the city of Burlington, multi-family property sales jumped 71 percent to 12 transactions in the first quarter, the median sale price slipped by about one-fifth to $372,500. Investors are searching for smaller multi-family properties, which is shifting the price-point lower.

About 3,500 new units are either planned or have been built recently in Chittenden County, which may bring the vacancy rate higher and continue to stabilize rents, according to Allen & Brooks’ December report.
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Multi-Family Averages
Median Sale Price:	Units Sold:	Newly Listed:	Days on Market:
$288,250 (-2.8%)	120 (-3.2%)	243 (0.8%)	88

Northwestern Vermont’s multi-family market remains competitive, given tight inventory levels and continuing interest from Vermont-based and out-of-state investors.

While in four counties combined, the median sale price slipped 2.8% and transaction volume declined 3.2%, Chittenden County had a 6.5% increase in the number of multi-family properties sold. While the number of sales and the median sales price were slightly lower in 2015, that was largely due to a tough comparison with 2014, when two large multi-family portfolios went on the market and several very expensive properties were sold.

A continuing issue for the multi-family market is a lack of available inventory, especially in Burlington, the most active market for investment properties. Our Realtors note that properties that are in good condition and in prime locations continue to sell quickly.

About 3,500 new apartments are either pending or have been built recently in Chittenden County, which may bring the vacancy rate higher and continue to stabilize rents, according to Allen & Brooks.

There will likely be continued growth in the renter market, however. Median household incomes in the Burlington area are about 7 percent below their 2008 peak, and many younger professionals are dealing with high amounts of student debt. That may crimp their ability to purchase homes and lead to more demand for rental housing, Allen & Brooks notes.

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A Higher Vacancy Rate

The rental market’s vacancy rate has seen some easing in recent months due to new apartment building construction. It now stands at about 3 percent in Chittenden County, or almost double the rate from a year earlier. Our Realtors have noted that while investors are keeping an eye on the trend, it hasn’t impacted pricing for multi-family properties. .

Demand for Winooski properties

Investors are increasingly searching for multi-family properties in this town thanks to demand from professionals who are drawn to its revived downtown area and lower costs than neighboring Burlington. Multi-family sales in Winooski rose 28% last year.

Rents Remain High

With vacancy rates still relatively tight, rents continue to rise across Chittenden County. Across all apartment sizes, rents rose 2.9% in 2015, according to real-estate consulting firm Allen & Brooks. Still, given that recently constructed apartment buildings are offering more choice to the region’s renters, our agents have seen some recent stabilization in rents.

Multi-Family Averages
Median Sale Price:	Units Sold:	Newly Listed:	Days on Market:
$288,250 (-3.6%)	92 (+8.2%)	202 (-0.5%)	90

The market for Duplexes and three- and four-bedroom unit properties has grown this year, with sales rising 8.2 percent in the first 9 months of 2015. However, our agents have noted that inventory is often an issue, especially when it comes to properties that are both in good condition and in prime locations.

With mortgage rates remaining low, some renters are considering purchasing a home rather than continuing to rent. We are seeing that refl ected in a higher percentage of fi rst-time purchasers in the market. This trend could push vacancy rates higher in the long term, according to Allen & Brooks.

At the same time, local businesses such as Gardener’s Supply and Turtle Fur are hiring, bringing new professionals to the region. Given that many of those professionals initially would rather rent than buy, that’s keeping the rental market strong.

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Inventory Remains Tight

With fewer multi-family properties entering the market in Burlington, investors are turning to neighboring towns such as Winooski, where properties have a lower price point and there may be more inventory. That has pushed the median sale price to a slightly lower level than a year earlier.

Chittenden County’s Attractive Vacancy Rate

There has been some easing in the region’s tight vacancy rate, although it remains below the national rate. The vacancy rate in Chittenden County now stands at 2.8%, above the long-term trend of about 1.4%, according to real estate consulting fi rm Allen & Brooks. The national vacancy rate is about 4.2%, by comparison.

Rents Remain High

Because monthly rents have steadily increased in Chittenden County, that’s proved attractive to investors. Across all apartment sizes, rents rose 2.3% last year, for instance. Still, the region’s high rents are of increasing concern among policy makers and renters.

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Multi-Family Averages
Median Sale Price:	Units Sold:	Newly Listed:	Days on Market:
$310,000	51 (-8.9%)	124 (0.8%)	103

The multi-family property market remains in high demand from investors, thanks to Northwest Vermont’s low vacancy rate and relatively high rents.

While that’s attracting buyers into the market for duplexes and three- and four-unit properties, our Agents are noting more demand from buyers than can be met with current inventory levels, especially when it comes to properties that are in good condition and in prime locations.

Across the four counties, the median sale price rose 4.2%, while the transaction volume slipped 8.9%. Several trends are impacting this market:

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Inventory Remains Tight

Those supply-and-demand issues are causing the median sale prices of multi-family homes to rise, with some properties attracting multiple offers. Given the lack of inventory, however, the number of transactions has declined during the first six months of this year when compared with a year earlier.

Chittenden County’s Attractive Vacancy Rate

While the long-term vacancy rate in Chittenden County is only 1.4%, there has been some easing this year given the construction of hundreds of new units, such as Finney Crossing in Williston and Great Cedars in Winooski, according to real estate consulting firm Allen & Brooks. That’s caused the vacancy rate to jump to 2.8%, the highest since Allen & Brooks started surveying the issue more than two decades ago. Nevertheless, that is still significantly lower than the national vacancy rate of about 4.1%.Because the vacancy rate has eased, renters are taking more time to choose their apartments, although Allen & Brooks notes that available units are eventually leased because of the still lower than-average vacancy rate.

High Monthly Rents

Investors are eager to participate in Northwest Vermont’s multi-family market because monthly rents are relatively high. Rent for a three-bedroom apartment was almost $1700 in 2014, which is also attractive to investors. Across all apartment sizes, rents rose 2.3% last year.

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Local businesses such as Keurig Green Mountain and the Immigration and Naturalization Service are hiring and bringing new professionals to the region. Many of those young professionals prefer to rent rather than buy at the moment.

However, as the economy continues to improve, more renters may shift into the home-buying market, which could lead to higher vacancy rates, according to Allen & Brooks.

 

MARKET INSIGHTS
Tight inventory remains an issue in the multi-family market.
Vacancy rates have eased this year, but still remain lower than the national average.
Monthly rents have continued to rise.