After a recovery in August, sales of apartment properties fell 11% year over year in September, according to Real Capital Analytics’ (RCA's) most recent market report.

“This decline comes on the heels of a slowdown since May in the growth in sales volume for the apartment sector,” RCA said in the report. 

RCA said the average monthly pace of sales growth in the first quarter of 2015 was 73% year over year. But in the second quarter, that number fell to 23% year over, and in the third quarter, it dropped to 5% year over year. Private investors have driven volume throughout the year.

“The market cycle on apartment growth is maturing,” RCA said in the report. “What had been double-digit price growth is slowing to more modest single-digit activity. In the current market, investors are now dealing with underwriting acquisitions in the face of growing competition from construction."

That said, RCA isn’t sounding any alarms. While growth in volume is declining, sales activity is still up 26% from this point last year.

"At the current pace, sales volume would need to fall to half of September’s levels for the remaining three months of 2015 just to keep volume unchanged from 2014,” RCA wrote in the report.

Part of the issue could have been financial-market turmoil, which RCA said pushed up mortgage rates on 7- to 10-year fixed-rate apartment loans. While the 200 basis-point (bps) quarterly jump (4.2%, on average, for the third quarter versus 4.0% in the second quarter) wasn’t dramatic, the monthly increase was faster and potentially more unsettling to investors, according to RCA. Even with these increases, RCA says there was enough of a spread between apartment cap rates (84 bps in high-rise rates and 162 bps in garden rates) and mortgage rates to provide leverage.

“With new construction coming to the market and debt costs rising sharply in the summer, volume may have been down a bit in August and September as buyers and sellers were temporarily just too far apart,” RCA wrote. “Sellers would likely want to achieve prices tied to recent comparable transactions, but some buyers faced with higher debt costs may not be able to pencil out such acquisitions to the same IRRs they had promised investors.”

While there was some volatility in volume, cap rates stayed steady. Cap rates held at 5.8% from August but were down 30 bps year over year. Garden cap rates came in at 5.9% (unchanged from August but down 40 bps year over year), while mid-/high-rise rates were at 5.1%, where they’ve stood since January.