Apartment Market and Sales Insights
The purchase of the Park View Apartments at their Trustee Sale was another of multiple Tides Equities properties that was not able to maintain sufficient cash flow due to the increased interest rate jump in mid-2022. Tides has already lost two properties in metro Phoenix and currently have two more in foreclosure.
Why the increase in foreclosures? – Metro Phoenix was one of the leading cities in the US with increasing rental rates from 2017 to 2021 as a result of vacancy rates dropping – reaching a low of 4.2% in 2021. Then came the developers with new construction jumping from 9,892 in 2021 and last year up to 23,993 units completed. The increased competition has been driving vacancy rates and concessions up – severely decreasing cash flow. For the apartment buyers that made purchases at low cap rates using leverage with adjustable rate loans, they are not able to refinance or sell with the higher cap rates and the continued increased loan rates. Going forward, with the new apartment completions and loan rates decreasing, plus the significant increase in housing demand from the current and announced massive investments – our market will soon reverse direction.