There’s data, the month-to-month and year-to-year moves that people track to keep score. Then there is what the data can mean, the story behind it. Not just whether things are up or down or sideways, but what it means. Why it matters.

In its Capital Trends report on the U.S. multifamily market, MSCI has plenty of data about how the first quarter of 2023 performed compared to some recent first quarters. Namely, there was a big drop in transactions and pricing. But the context is deeper. Here are four views of multifamily reality that come from what MSCI conveyed.

  1. The quarter wasn’t as grim as things seemed.

The year-over-year quarterly performance of apartments in total was down 64%. Over the last 12 months, transaction volume was off by 34%. Simple and enough for people to perhaps step back. The report saw it differently. “Do not focus on the sharp year-over-year declines in apartment deal volume,” MSCI wrote. “These changes in the marketplace relative to a period of excess liquidity obscure the fact that deal volume was still at an elevated level for the apartment sector in the first quarter of 2023. Challenges abound but there are still characteristics of this market that appeal to investors.”

  1. A story of under-allocation.

“Investors were under-allocated to apartments relative to other asset classes for a time, and both investments and prices surged as interests shifted,” the report said. “It is not yet clear that investors have the allocations that they desire; there are many moving parts in place. But with the RCA CPPI for apartments down 10.3% from a year earlier and volume back to average levels, one might make that case. Changes in the asset types and locations for the apartment market are also at play.”

  1. Cap rates synch up on mid-high rise and garden.

Since 2001 there has been significant variation in cap rates between mid-high rise buildings and garden: an average difference of 74 basis points with a low of 40. But going into and through 2022, that started to change. “Cap rates are on the rise for the apartment sector,” the report said. “RCA Hedonic Series cap rates hit 5.0% in the first quarter, up 50 bps from the record low level set a year earlier. Cap rates were up more for the mid/high rise segment of the market than for garden apartments: 60 bps versus 50 bps. Both segments of the market reached the 5.0% level for the quarter.” At this point, they seem synced and it’s “not clear that the market will simply revert to the pre-pandemic trend.”

  1. Long-term trends outperformed

“One area where mid/high rise assets did outperform for the quarter was the pace relative to the long-term trend,” the report said. “Individual asset sales involving mid/high rise assets totaled $7.0b for the first quarter. From 2005 to 2019 sales of such assets averaged $5.4b across each first quarter. Activity then is 30% higher for mid/high rise assets than over the long term. Sales of garden apartments are elevated too, but the $12.9b in individual asset sales for the quarter stood only 18% higher than the long-term average.”