Real Capital Analytics Q2 2016 market report found that overall, across all apartment markets, cap rates were at an average of 5.6 percent, and year-over-year rates are flat.

Cap rate data from 2011 to 2016. Source: RCA

Cap rates in non-major metro areas have been relatively flat in recent quarters, with a Q2 2016 rate of 6.5 percent, and fluctuations of only 10 base points from quarter to quarter. The more expensive properties in the six major metropolitan areas - Boston, New York City, DC, San Francisco, Los Angeles, and Seattle - are seeing a long-term downshift. The current six major metros rate, 4.6 percent, is down only 10 base points YOY, but the rate is a historic low, 130 base points below the long-term average.

These rates have decreased as the sale volume has increased; the single asset deal volume in the six major metros has risen from close to 35 percent of all single asset transactions in the second half of 2015, to close to 40 percent in the first half of 2016. According to RCA, this suggest “a move towards a risk-off stance on the part of investors.”

Price growth has fallen in the six major metro sector as well, with only an 11 percent gain YOY. In contrast, non-major metros have seen a 14.5 percent YOY gain, according to the Moody’s/RCA CPPI™ index. In the previous quarter, market turmoil brought six major metro prices down 1 percent, while non-major market prices increased by 3 percent. The six major metros have stabilized into Q2 2016, however, with a 5.4 percent price growth increase over Q1.

Growth in the Moody’s/RCA CPPI™ index slowed from 2015 into 2016, with a slight monthly decline in February. This sparked fears that more price declines were coming, according to RCA, but preliminary figures do show price growth through Q2 2016, even if volume has not reached 2015 levels.