A loss for investors –– and supply skeptics

A tweet bouncing around the Austin internets from a local marketing influencer offered some valuable insight into housing economics.

Noah Kagan says he lost $100k after investing in a real estate syndicate that purchased an apartment complex in North Austin (12113 Metric Blvd) that is now in foreclosure. He posted a screenshot of an email from the investment fund explaining the bad news. You can read the whole thing, but this is the part I'm going to highlight:

The reality is that we purchased this property in December 2021 at the peak of the market, and since then, multifamily fundamentals have deteriorated rapidly. In December 2021, SOFR was 0.05%, Austin market occupancy rate stood at 93%, and this asset was bought at a 3.4% cap rate. Today, SOFR has risen to 5.32%, Austin market occupancy has dropped to 88% with a 20-30% increase in supply coming available leading to the lowest Austin market occupancy of all time.

Translation: they're getting killed by high interest rates but they can't raise rents because there's too much new housing being built.