Pace of O.C. Apartment Sales Is Slowing, Analysts Report

The good times for Orange County owners of apartment buildings might not be quite as good as some might think. While sales remain strong, analysts say the pace has cooled considerably since the start of the year.

“The velocity is slowing,” said Jon Mitchell, a broker at Marcus & Millichap in Palo Alto. “More people were willing to sell at reasonable prices last year.”

Mitchell said he saw signs of slow growth in December but thought the lull would end once fears eased about year 2000 computer glitches. But the pace still hasn’t picked up to last year’s level, he said. Through the first four months, 1,434 units were sold in Orange County, compared with 2,487 last year, the firm said. Total sales decreased to $97 million from $152 million a year ago.

Sellers are rarely receiving multiple bids on buildings anymore, even though Marcus & Millichap estimated that the average price per unit would rise 8% through early next year. The median price has grown to $63,000 per unit through the first four months of the year, compared with $61,000 in the same period last year.

Mitchell, who recently brokered a Fullerton apartment building for $1.7 million, said rising interest rates, among other factors, have made purchases more costly to finance. In addition, record high rents, low vacancy rates, an abundance of applicants and a dearth of construction have caused sellers to inflate their asking prices beyond what many buyers have been willing to pay.

“A lot of property owners don’t want to sell because they think prices will keep going higher and higher,” Mitchell said.