This month's sunny edition includes the latest apartment market data and some notes and updates from our leadership and property management at Steadfast. We also share a new investor resource on affordable and workforce housing to help you better understand these investment opportunities.
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What’s Happening in the Apartment Market?
Apartment supply glut is easing, while elevated debt costs still challenge transaction activity. Rent growth generally remains pressured.
Here are some highlights:
Apartment deliveries are coming down from the peak, and the construction pipeline has contracted 52% from its 2023 high. That should reduce future lease-up competition, but vacancy remains elevated in many markets and CoStar expects the process of absorbing excess inventory to extend into 2027.
Capital markets are improving, but only where pricing has adjusted. CoStar reports that multifamily property values have stabilized and remain roughly 20% below their 2022 peak. Sales volume is also up roughly 20% from the prior year, suggesting more transactions are clearing where pricing has adjusted to today’s market reality.
The issue remains that debt is still expensive. When the 10-year Treasury is in the mid-4% range, apartment loans remain costly, and many acquisitions still struggle to create positive leverage.
The Fed’s new leadership adds another point for the market to watch. Chair Kevin Warsh took office with the 10-year Treasury at 4.56%, a reminder that long-term rates remain the key pressure point for apartment financing.
A Fed shift can help sentiment temporarily, but deals still need at least one of three things to pencil. 1) Lower borrowing costs 2) Lower purchase prices, or 3) Stronger property income. Until one of those changes meaningfully, many sellers and buyers could remain apart.
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Behind the Scenes at Steadfast
📝 A note from Bill Stoll, Steadfast's Chief Investment Officer: "Our investment posture in June was diligent, highly selective, and submarket-focused. We reviewed several opportunities but conviction was harder to achieve for conventional deals. We also reviewed affordable and workforce housing opportunities in Texas and Tennessee, many of which pencil better than conventional deals in our target markets today. We continue to pursue apartments in areas that have both, strong population and rent growth, but remain open for opportunities with significant discounts to replacement costs until demand catches up with supply. While we work to bring new opportunities to the platform, our operational focus remains a top priority."
📝 June's glimpse from Steadfast Property Management: "At Oxbow Hill Country, occupancy increased from just under 80% at acquisition to 91%, and the property is now 95% leased. Our team has been hosting regular resident events, spending more time with residents to improve service, curb appeal, and amenity conditions. That work helped drive 77% renewal retention for June and 86% for July, an early sign that resident engagement and follow-through are beginning to take hold. At Estraya Boerne, the property continues to maintain ~95%+ occupancy, achieved 65% retention for July, and has reduced concessions. The team also hosted a successful summer pool party with more than 100 residents in attendance, with the maintenance team grilling food for the community. Our goal is to keep residents engaged, improve the resident experience, and reduce avoidable turnover while continuing to build and maintain occupancy during the busy leasing season.”
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Your Resources Hub
New Resource: Affordable and Workforce Housing
More than 50% of Steadfast’s owned and managed portfolio is affordable, mixed-income, or workforce-oriented housing, compared with conventional market-rate properties. We created this new resource to help you understand the terms behind these investment opportunities, including how AMI and rent limits work, and why operator experience is important when a property involves tax credits, rent restrictions, subsidy contracts, or ongoing compliance requirements.
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This email is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. Any securities offerings will be made only to persons who are verified as Accredited Investors, pursuant to Regulation D, Rule 506(c), of the Securities Act of 1933, as amended, and only through the delivery of definitive offering documents, including a Private Placement Memorandum. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. Forward-looking statements contained herein are not guarantees of future performance and involve risks and uncertainties that may cause actual results to differ materially. Prospective investors should consult their legal, tax, and financial advisors before making any investment decision. Steadfast Direct is the business name used by Steadfast Investment Management LLC.
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