The multifamily real estate market in Long Beach, particularly for properties with five to twenty units, has seen notable shifts over the past year. As we close out 2024, it’s time to examine the current state of the market, the factors that have influenced its trajectory, and what investors can anticipate for 2025.
Understanding the Multifamily Market: Five Units and Above
Before diving into the data, it’s important to recognize that the investment dynamics of five-unit properties and larger are quite different from those of four-unit properties and below. The key difference lies in financing. Properties with four or fewer units qualify for traditional 30-year mortgages, often requiring only 25% down. These loans are based primarily on the borrower’s income and financial qualifications rather than the property’s performance.
However, for properties with five or more units, lenders assess the property’s financial viability before approving loans. The financing terms are different, and lenders take a more scrutinizing approach, ensuring that the property generates sufficient income to justify the loan. This distinction makes the five-plus unit market unique, with fluctuations that don’t always mirror those of smaller residential investments.
Sales Surge in 2024: A 40% Increase
One of the biggest takeaways from 2024 is the substantial increase in sales volume. In 2023, there were 85 transactions involving properties with five to twenty units. By 2024, this number jumped to 119—a 40% increase in sales activity. This surge indicates that investor confidence remains strong, and despite market fluctuations, buyers were eager to capitalize on available opportunities.
The rise in sales was driven by a combination of factors. Investors, who had been waiting for prices to dip further, realized that the market wasn’t going to see drastic price reductions. While property values did decrease, they didn’t fall enough to keep investors sidelined. Instead, many seized the moment, recognizing that prices were stabilizing and favorable deals were available.
Cap Rates and Valuation Adjustments
The cap rate—a key metric for real estate investors—saw a noticeable increase in 2024. In 2023, the average cap rate for five-plus unit properties was 4.8%. By 2024, it had risen to 5.6%, marking a significant shift in property valuation.
An increase in cap rates typically means that property values have declined. In this case, values dropped by roughly 14-16%. While this wasn’t ideal for current owners, it presented attractive buying opportunities for investors. A higher cap rate means a better return on investment, which explains why so many buyers re-entered the market in 2024.
Price Per Unit Decline: A Buyer’s Market Emerges
Another important metric in multifamily investing is the price per unit (or price per door). In 2023, the average price per unit stood at $274,000. By 2024, this figure had dropped to $247,000, representing a 9.1% decline. This reduction in pricing made investments more appealing to those who had been hesitant to buy at peak valuations.
The lower cost per unit allowed investors to secure better deals, strengthening their long-term potential for profit. As a result, we saw increased market activity, proving that price adjustments were a necessary catalyst for transactions.
Days on Market: Properties Selling Faster
A crucial factor for sellers is how long properties remain on the market before selling. In 2023, the average days on market for five-plus unit properties was 148 days. In 2024, this number improved to 133 days—a decrease of approximately 10%.
While properties are still taking time to sell, the shorter listing period suggests that pricing adjustments have led to more realistic valuations. Buyers are willing to transact when they see fair market pricing, reinforcing the need for accurate property valuations by sellers and brokers.
Investor Motivation and Market Dynamics
Beyond the numbers, the psychology of investors plays a major role in market movement. Many investors hesitate to buy when prices are at their peak, but once they see a 10-15% drop in values, they become eager to capitalize on opportunities. This pattern was evident in 2024 as sales surged alongside price declines.
Moreover, a strong investment market benefits the overall real estate ecosystem. When new owners acquire properties, they often reinvest in improvements, particularly in a city like Long Beach, where older housing stock requires maintenance and upgrades. These improvements contribute to better living conditions and help modernize the city’s rental market.
Outlook for 2025: Optimism for Continued Growth
Looking ahead to 2025, there are reasons to remain optimistic about the five-plus unit market in Long Beach. Key expectations include:
- More Inventory: A higher number of properties may hit the market, providing more options for investors.
- Continued Sales Growth: Given the strong activity in 2024, sales volume may continue to rise.
- Stable or Slightly Higher Prices: While prices have adjusted, the market may stabilize or see modest increases as demand remains consistent.
- Attractive Financing Options: As market conditions evolve, investors will likely find favorable financing terms, encouraging more purchases.
For current property owners, 2025 presents an opportunity to strategize. If you’re considering selling, now is the time to consult with a market expert to determine the best course of action. If you’re an investor looking to buy, aligning with the right real estate professionals can help you access off-market deals and valuable insights.
Final Thoughts
The Long Beach multifamily market experienced significant shifts in 2024, with increased sales, adjusted pricing, and improved market activity. As we move into 2025, the outlook remains positive for both buyers and sellers. Whether you’re looking to invest or sell, staying informed and working with experienced professionals will be key to maximizing opportunities in the evolving real estate landscape.
For any questions or to discuss your real estate goals, feel free to reach out to Sage Real Estate. Let’s strategize the best path forward for your investments!
