Following quarterly increases for two years due to rising interest rates, going-in cap rates, exit cap rates and unlevered internal rate of return (IRR) targets for prime multifamily assets remained unchanged for a second consecutive quarter in Q2. This trend could be due to expectations that the Fed will begin cutting interest rates later this year.

A going-in cap rate estimates the yield an investor can expect from a property when they first acquire it while an exit cap rate estimates the expected yield on a property investment when it's sold. Unlevered IRR estimates the annualized rate of return on an investment excluding debt financing.

The spread between going-in and exit cap rates showed a slight decrease to 11 basis points during the quarter, according to CBRE's Prime Multifamily Underwriting Survey. The average prime multifamily going-in cap rate fell by four bps in Q2 to 4.97%, while the average exit cap rate fell by five bps to 5.08%.