Brian D. Milovich

Warren Buffett famously said in his 1986 letter to shareholders, “to be fearful when others are greedy and to be greedy only when others are fearful.” This is great advice, and an admirable goal to have, but it can be incredibly difficult to execute. Now, however, there’s plenty of fear in the real estate market, and unlike past times of distress, there are attractive risk-free options for those who are fearful.

At Calvera, we invest in apartment buildings through discretionary funds where we receive capital from numerous investors. Sometimes, investors really like a particular deal and they want more of it. To accommodate those investors, we offer the ability to co-invest alongside the fund, so they have extra exposure to that single asset.

In today’s market, owners need to actively manage their properties’ expenses. Rents are down or flat in most markets across the country. Therefore, reining in expenses preserves net operating income and buys an owner time until the market allows for rent increases.

For a proactive team like Calvera, waiting on the sidelines for the right deal to materialize is tough, but it can be the right thing to do. Learn why our latest multifamily property acquisition in Fort Worth, Texas checks all the boxes for potential investment success.

More distress is to come in certain metro areas and in the overall apartment market. How deep the distress becomes remains to be seen as there has already been a substantial reset in pricing, both from interest rate increases and lackluster urban recoveries.

We can’t prognosticate where interest rates are headed or if the Fed is pushing the economy into a recession. We do know that growth is slowing and that there remains a large bid-ask spread between sellers and buyers in the apartment market.

There are going to be fewer apartment buildings built in the near term as interest rates and slowing rents make it unfeasible to begin new construction. According to an analysis by Real Page, the U.S. Census Bureau shows a seasonally adjusted drop in multifamily permitting as of July 2023 of 32.2% compared to the prior year.

The inflation rate in Minneapolis was tracked at 1.8%, primarily due to low shelter costs. New [apartment] supply coupled with tepid demand has been a killer for rents and occupancy

Subsequent increases in the Fed Funds rate are going to continue to put upward pressure on mortgage rates, which will continue to exacerbate the growing unaffordability of single-family homes.

The apartment market is at a standstill, and the numbers show it. As of Q2 2023, multifamily transaction volume (i.e., sales of apartment buildings) is down 71% compared to a year ago and is on par with activity back in 2009, in the middle of the Great Financial Crisis when there was more fear in…