Big news for the small multifamily market in the third quarter of 2024 was that cap rates averaged 6.0% in the quarter, moving the average cap rate below its six-year high. They are up 31 basis points from the same time last year and 98 basis points above the “cyclical low point set in 2023.” The risk premium above the 10-year Treasury yield increased by 42 basis points to 201. That’s a revision to a pre-pandemic norm.

In general, Q3 was an improvement for the small multifamily market according to Arbor, moving some toward normalization. They attributed much to the rate cuts from the Federal Reserve, with pricing, cap rates, and credit conditions improving. Then there is easing interest rate pressure, strong rental demand in many if not most markets, and government-sponsored enterprise lending strengthening the industry.