Freddie Mac’s Multifamily Apartment Investment Market Index (AIMI) fell in all markets in 3Q2023—a sign that the relative value of investing is lower now.

The AIMI measures how the relative value of investing in multifamily properties changes over time, based on current mortgage rates, property prices, and rental rates. In the third quarter, it fell to 107.1 throughout the nation, impacting all 25 regional markets tracked. The decline follows two previous quarters when the index rose, indicating that the relative value of investing at that time was higher.

Freddie Mac attributed the 2.1% drop in the index in 3Q to higher interest rates. Taking the prior 12 months into account, however, the index was up 0.3%—a “notable” increase. The company attributed it to a significant drop in property prices that offset the effect of markedly higher mortgage rates.

One component of the AIMI, net operating income (NOI), rose nationally and in 16 markets. But six of these markets saw gains of 0.5% or less. Boston enjoyed the fastest growth in NOI at 3.9%, while Las Vegas and Phoenix saw the worst falls—down 5.5%.

In the third quarter, property prices dropped nationwide by more than 10%, except in Charlotte and San Diego. Mortgage rates rose 41 basis points, the first time since 4Q 2022. For the year, mortgage rates rose 114 basis points, property prices fell 11.9%, and NOI grew 0.3%.

“Based on these changes, the index suggests that investors are paying slightly less per dollar of property income compared with one year ago,” Freddie Mac noted.