Freddie Mac recently released its Apartment Investment Market Index (AIMI) for Q2 2020. While the index was down slightly from the Q1 reading, it was still up for the year.
Defining AIMI
Freddie Mac developed the AIMI as a quick way to assess the changing attractiveness of investing in multifamily properties in a given market over time. It is derived from three market variables: the interest rate on multifamily mortgages, the growth rate in multifamily property prices and the growth rate in multifamily net operating income (NOI). The higher the value of the AIMI, the more attractive an investment in multifamily property is said to be. Higher growth in NOI results in a higher AIMI while higher multifamily mortgage interest rates or higher growth rates in multifamily property prices result in a lower AIMI.
Each quarter, Freddie Mac calculates a national AIMI and also local AIMI’s for 25 top metro areas. Since Q1 2000, the lowest national value for AIMI was recorded in Q3 2008, while the highest value was recorded in Q4 2010.
Assessing the trends
In Q2 2020, national AIMI fell 0.31 percent from the Q1 reading. However, it was up 6.05 percent from the year-earlier reading. The recent increase in national AIMI is largely being driven by the fall in mortgage interest rates. These changes, as well as the changes in the other components of the index, are shown in the following chart.
The absolute values of the AIMI for the different cities cannot be used as a basis of comparison for the attractiveness of investments in multifamily housing between the cities. This is because the AIMI for each city has been normalized to a value of 100 for Q1 2000. Some cities may have had an attractive investment environment at that time and some may have had a poor investment environment. In either case, the today’s AIMI for the city indicates the extent to which the investment environment has improved since then (if it is currently greater than 100) or gotten worse (if it is currently less than 100). However, since the cities did not start from the same absolute investment environment, the absolute levels of AIMI cannot be compared.
Freddie Mac suggests that the changes in the levels of the AIMI be used as an indication of where conditions are improving and where they are becoming less attractive. With this in mind, the following table shows the quarterly and annual percentage changes for the AIMI in the cities tracked.
| City | Annual Change | Quarterly Change |
| Atlanta | 1.76 | -1.71 |
| Boston | 5.74 | -2.25 |
| Charlotte | 6.66 | -0.16 |
| Chicago | 10.68 | 1.18 |
| Dallas | 4.83 | -1.81 |
| Denver | 5.58 | 0.39 |
| District of Columbia | 4.00 | -1.78 |
| Houston | 3.99 | -2.01 |
| Jacksonville | 4.95 | -0.31 |
| Las Vegas | 2.01 | -1.13 |
| Los Angeles | 5.55 | -2.56 |
| Miami | 2.26 | -4.84 |
| Minneapolis | 5.81 | 0.51 |
| Nashville | 4.70 | -2.22 |
| National | 6.05 | -0.31 |
| New York | 12.75 | -0.79 |
| Oakland | 5.60 | -2.66 |
| Orlando | -1.11 | -2.94 |
| Philadelphia | 7.62 | -1.16 |
| Phoenix | -0.04 | -5.60 |
| Portland | 4.88 | -0.74 |
| Raleigh | 5.75 | -1.00 |
| San Diego | 7.89 | 0.93 |
| San Francisco | 3.72 | -3.34 |
| Seattle | 11.58 | 0.07 |
| Tampa | 5.49 | -1.59 |
Sorting the data, the cities with the greatest percentage increase in AIMI over the last year are New York, Seattle, Chicago, San Diego and Philadelphia. The cities with the greatest percentage decline in AIMI over the last year are Orlando, Phoenix, Atlanta, Las Vegas and Miami.
The cities with the greatest percentage increase in AIMI from Q1 to Q2 are Chicago, San Diego, Minneapolis, Denver and Seattle. The cities with the greatest percentage decline in AIMI from Q1 to Q2 are Phoenix, Miami, San Francisco, Orlando and Oakland.
Of course, the characteristics of individual properties are key to deciding whether to invest. However, if there is a market of interest and if its AIMI is rising, it may be a signal that it is time to act.
The AIMI announcement can be found here.
