Published January 11, 2013

This week we take a look at the tremendous surge in sales activity in December. We just talked about sales volume last week. So we planned to talk about in-migration this week, and its impact on apartment demand. We even finished the video. But December was a big month for apartment sales, a really big month. So we need to visit sales volume again. We think you will be amazed. We were.

December was a big month for apartment sales, a really big month. Fifty-eight sales of 5-unit and larger market rate apartments sold last month in King, Pierce, and Snohomish counties. That's more than we've seen close in any month since June of 2006.

In total, investors purchased $556 million of apartments. It's not an all-time record but it's close, running second only to September 2005 when buyers spent $616 million.

Here's another almost-record. Investors closed on 3,829 units. That's also second only to September 2005 when they bought 4,628 units.

Why the sudden surge? Low mortgage rates, a strong rental market in 2012, and strong demand for apartment investments in the Puget Sound region helped generate this surge in volume. We also suspect investors last year were anticipating higher capital gains taxes after 2012. Could that have anything to do with it?

Taxes

We did a quick analysis of December 2012 sales. The properties that sold last month were held an average of 12 years and sellers sold for an average of 44% more than they originally paid. Estimating depreciation over each property’s ownership period, the taxable gain should be close to 50% of the sale prices on average. Given the change in capital gains rates, that saved sellers at least $23 million by closing in 2012 instead of 2013. And that’s just for December sales.

If the gains on the rest of the sales last year were similar, tax savings multiply to $110 million. And that's just for our metro area. Multiply that by 20 or 30 major markets around the country and... well, you get the point.

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More videos and articles

Be sure to check back next week for a new video and discussion of current apartment trends for the Puget Sound region. Here are some other recent articles you may find interesting:

• Apartment sales volume trends
• Cap rates and mortgage rates
• Apartment development pipeline
• Apartment investment update
• Capital expenses and replacement reserves
• Rent an apartment or buy a home
• Apartment renovation trends
• Apartment financing trends
• Real estate taxes, assessments, and appeals

Editor's note: This is the complete article.

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