Multifamily investment conditions weakened in first-quarter 2022, according to Freddie Mac’s Apartment Investment Market Index (AIMI).

The index slid 5.3% quarterly and 6.1% annually in Q1 2022. The AIMI distills the combination of rental-income growth, property price growth and mortgage rates into one index. An increase in the AIMI suggests more favorable circumstances for multifamily investment opportunities while a decline implies that investment prospects may be thinning.

The same adverse conditions holding back single-family home purchases — skyrocketing prices and steadily rising mortgage rates — also dented multifamily investment prospects. Property prices grew by 21.1% over the past 12 months, Freddie Mac reported. On a quarterly basis, asset price growth moderated but remained strong at 4.3%, with prices rising in each of the 25 markets tracked by Freddie Mac during the period.

Meanwhile, mortgage rates jumped 41 basis points year over year — the largest annual gain since 2018 — and rose by 29 bps in the first quarter alone.

These headwinds were more than enough to counteract a substantial increase in net operating incomes, which rose by 19.8% year over year. As a result, the AIMI backtracked for a second straight quarter.

“The offsetting impact of price growth and mortgage rates on increasing net operating income indicate investors are paying more per dollar of income than a year ago,” said Steve Guggenmos, vice president of research and modeling at Freddie Mac Multifamily.

“Despite seeing dramatic net operating income growth, we are seeing a decline in the index nationally and across all markets, suggesting it may be increasingly difficult to find attractive multifamily investment opportunities.”