Dive Brief:
- The third-quarter apartment sales landscape was very similar to August’s, with sluggish single-asset sales. Still, the merger of Equity Residential and AvalonBay Communities drove deal volume up 139% year over year to $114.1 billion, according to a report that data firm MSCI Real Assets shared with Multifamily Dive.
- The RCA CPPI for apartments declined 4.6% YOY. It fell 6.2% at an annualized rate between Q2 and Q3, as pricing deteriorated over the past four months. The annualized decline in values in each quarter has outpaced the yearly drop. In contrast, the RCA US National All-Property CPP rose 0.9% YOY.
- Without the creation of Vivmark, sales would have fallen 7% YOY for the quarter and been flat so far for the first nine months of the year. However, with the deal, 2026’s third quarter was the largest on record, surpassing $90.4 billion in 2021 and $78.4 billion in 2022. It was the second-largest quarter on record, falling only behind Q4 2021, which tallied $167.1 billion in trades.
Dive Insight:
Prices usually follow transaction growth, with investors underwriting appreciation as they bid, according to MSCI.
“Here, volume is rising while prices fall, which points to a single transaction rather than broader confidence in the apartment sector,” MSCI said in the report.
The usual gauge of industry health, individual sales, dropped 12% YOY to $34.3 billion in Q3, marking the second straight quarter of decline. In the six major metros, individual sales were approximately flat at $11.8 billion, while they dropped 17% YOY to $22.5 billion in non-major cities.
The Vivmark deal pushed up volume across various subtypes. Portfolio sales rose 19% YOY to $10.2 billion on the strength of the Vivmark deal, while mid- and high-rise transactions jumped 248% YOY to $70.2 billion.
The market was hardly thriving before the 10-year Treasury began rising six months ago. But since then volumes have declined, and cap rates have risen.
In Q1 2022, cap rates sat at 4.5%, according to MSCI’s hedonic rate calculation. Now they’re 140 basis points higher. While much of that movement came in early 2024, they climbed 20 bps over the last year to 5.9% in Q3.
As the 10-year Treasury moved above 5% in Q3, owners say it has become difficult to project deals they’re underwriting.
“The last 60 days have been difficult, and from our end makes it difficult to pin down where we think exit caps are going,” American South Capital Partners Executive Vice President Tyler Epps told Multifamily Dive.
Tyler Chesser, the co-founder and managing partner of CF Capital, said that “cap rates have moved out since the September [Federal Reserve] meeting,” and sellers are slow to accept it.
“Historically it takes a few quarters for seller expectations to catch up to the market,” Chesser previously told Multifamily Dive. “Until they do, the bid-ask gap means a lot of deals stall, get retraded, or die.”
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