Shaver, Les

While other property sectors grew in April, the apartment market took a sudden dip, falling 37% year-over-year to $6.5 billion, according to New York-based research firm Real Capital Analytics (RCA).

Over the past 12 months, transaction volume had averaged $7.5 per month. For the first quarter of 2015, adjusted sales were 72% year over year. And, even with April's weak showing transactions through the end of April were 34% above 2014's pace.

RCA attributes April’s decline to a slower pace of growth in portfolio and entity-level transactions. The numbers back that up with individual assets growing 8%, which large transactions fell. That trend will change soon, though, when Brookfield Asset Management’s purchase of Cleveland-based REIT AEC is complete. And even more sales could follow.

As apartment sales were slowing, cap rates continued to fall, sliding to 6% in April. The previous low, which was 10 basis points higher, was achieved before the financial meltdown. Garden apartments saw cap rates fall 30 basis points to 6.2%, while mid and high-rise rates held steady at 5.1%.

RCA also incorporates Moody’s/RCA CPPI in its data in its monthly reports. That research shows apartment prices rising 4.5% in the first quarter. But RCA doesn’t seem sold on that number.

“This quarterly pace of growth seems to be a little bit of noise,” RCA said in the April report. “Cutting through the noise, the quarter seems to fit within the average 3.6% quarterly growth seen since mid-year 2010.”

The Moody’s/RCA CPPI showed that price increases for mid/high-rise assets grew 4.9% in the first quarter, outpacing garden properties at 3%. “The first quarter figures then fit the pattern of the average quarterly pace of growth over the last two years: 3.4% for garden assets vs. 4.7% for mid/high-rise,” RCA said in the report.

Oakland led all metros posting a 54% price gain in the first quarter, though RCA said that is “probably some noise but is also a signal of the outflow from the productive technology economy of San Francisco as well.” 

Showing the strength of California, Sacramento came is second with a 44% price appreciation. “Here, the story is likely more a function the recovery from the lows of the housing bust,” RCA said.