NEW YORK CITY-When it comes to real estate investment, no matter which way you look at it, the market hinges on the swings and shifts of the capital market. For the apartment sales market, the bright spots are few and far between, according to Real Capital Analytics. Still, compared to other property segments, multifamily isn’t doing too poorly. Like in all property types, average prices for apartment assets across the country fell from their peak, according to the second-quarter Moody’s/REAL Commercial Property Index. While the 10.3% decline of apartment prices was a mere 10 basis points less than for other commercial properties–in the top 10 markets–multifamily prices were down just 5.2%. On the plus side, it seems that sellers are beginning to come to grips with the fact that prices have fallen. As a result, the number of signed contracts are up and the pace of monthly sales declines is slowing. Still, the $3.2 billion in apartment sales in July were 56% less than what was racked up 12 months earlier, and made for the slowest July in five years. Yet again, those figures aren’t too bad when compared to what’s occurring in other property types, or even sales within the sector; average monthly deal volume between March and May was 20% less at $2.6 billion. RCA analysts largely attribute the activity to the continued availability of financing from Fannie Mae and Freddie Mac. Interestingly, garden assets accounted for most of the transactions in July, with $2.3 billion traded. Overall, more than 140 communities changed hands, and of those, there were few portfolio deals. This month, say researchers, will be a “market bellwether for the rest of the year”, as it is typically one of the most active months for new offerings. “The expected wave in offerings will add to the lingering inventory of early 2008 offerings still on the market,” they state, pointing to $5-billion worth of new properties that were put on the block in July. Further, those offerings outpaced new closings by 50%. “The asking prices of the September offerings may be even more telling to see if sellers are ready to accept pricing that better reflects existing market conditions and entices buyers back to the market in force.” Cap rates, too, are on the rise and are approaching 6.5%, an increase of some 25 basis points over the summer. Average caps are the highest they’ve been in the multifamily sector since early 2005. So far this year, just 11 investors bought more than $300-million worth of apartments, and some of those players operated in partnerships. Compared to last year, the number is scant. Buyers who spent that much on apartments–at least 58 in 2007–didn’t even make it to RCA’s Top 20 Buyers list. Interestingly, however, the mix of buyers and their share of acquisitions have remained relatively constant since before the credit markets turned a year ago, though the amount they spend has declined. With $1.7 billion in deals closed, the highest figure since Q4 2006, REITs accounted for 21% of sales in the second quarter. But don’t let that number fool you–American Campus Communities’ acquisition of GMH Communities represented $1.2 billion of that total. Meanwhile, UDR Inc. was both a top acquirer and buyer, as they move ahead with their portfolio reorganization. The REIT bought $500 million in properties so far this year. Institutional players, meanwhile, remained steady with a 20% market share, but the $1.7-billion purchase of a 7,000-unit portfolio by DRA Advisors and Steven D. Bell pumped up that figure. And private players continue to be the most active investors in apartments. Mainly through one-off transactions, they accounted for 60% of deal volume last year and this year.

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