Los Angeles multifamily sales market shows gradual recovery

The Los Angeles multifamily market has faced significant challenges over the past two years, following a record-breaking $9.13B sales volume in 2021. During Q4 2021, the federal interest rate stood at just 0.5%, fueling robust activity, where favorable lending conditions and loose underwriting drove unprecedented sales volume across the region.

In contrast, 2023 saw a sharp rise in the federal interest rate to 5.50%, resulting in a dramatic slowdown in capital markets activity. Multifamily sales volume plummeted to just $3.49B for the year, as tighter lending conditions made it increasingly difficult for lenders to underwrite larger apartment transactions or provide construction financing.

As we enter 2025, conditions are beginning to shift, as the federal interest rate has declined to 4.50%, with the Federal Reserve signaling two additional rate cuts planned for this year. Notably, Q3 and Q4 2024 recorded the highest sales volumes in the past seven quarters, indicating that declining interest rates are already reinvigorating Los Angeles’ multifamily sales market. If this trend continues, further rate reductions are likely to drive even greater market activity.