Dive Brief:
- Apartment sales dropped 50% year over year to $6.2 billion in April, according to a report that data firm MSCI Real Assets shared with Multifamily Dive. Subdued demand across the sector pulled down trades, which fell to their lowest level since mid-2020.
- Apartment prices dropped 1.1% YOY in April, marking the seventh month of declines according to the RCA CPPI, a measure of apartment prices. However, these declines are still better than the 10%-plus deterioration in values the industry experienced in 2023 after the Federal Reserve began hiking interest rates.
- Apartment cap rates were largely unchanged, sitting at 5.4% for mid- and high-rise properties and 5.6% for garden assets. Overall, cap rates came in above 5.5%.
Dive Insight:
The sales declines hit all product types and deal sizes.
Individual asset sales, the bedrock of the apartment transaction market, dropped 50% to $4.7 billion in April. Portfolio and entity sales plummeted 51% year over year to $1.5 billion, according to MSCI.
Garden-apartment sales dropped 55% YOY to $3.4 billion, while mid- and high-rise sales were down 42% to $2.8 billion.
With the AvalonBay Communities-Equity Residential merger closing in the second half of the year, volume for portfolio and entity trades in 2026 will eventually jump.
But the picture for smaller deals may not get better anytime soon. The 10-year Treasury rose from below 4% in late February to above 4.5% in early April, which “flows directly into our debt costs and exit cap rate assumptions,” Tyler Chesser, co-founder and managing partner at Louisville, Kentucky-based multifamily firm CF Capital, told Multifamily Dive via email.
That came on top of an already sluggish transaction environment that “has been more of a buyer's market,” since interest rates started rising in 2023, according to Ivan Barratt, founder and CEO of The BAM Companies.
“Transaction volume is still pretty muted,” Barratt told Multifamily Dive. “Anyone who can afford to wait is waiting.”
Barratt said he’s starting to see more buying opportunities hit the market. “I think there's still some more pain to come as lenders put operators' feet to the fire,” he said.
However, those forced sales could also come at a discount, pushing valuations even lower.
“We're already starting to see more of those,” Barratt said. “It’s nothing necessarily that we would buy, but it's more opportunistic.”
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