Apartment Cap Rates Trend Lower

New market data shows that apartment cap rates are falling significantly towards values we haven't seen in 5 years.  With risk being minimized by lower interest rates, buyers are starting to purchase again due to the returns these properties are yielding.  What is starting to happen now, especially in a market like mine in Missoula, MT which is heavily dependent on the student population of the University of Montana, is that the cap rates are dropping to the point where most investors are teaming with builders to develop better class A properties instead of paying for older inventory.  At low holding costs and interest rates it makes a lot more sense to develop this income property instead of paying for a low cap rate on a sub-par property or a property that shouldn't demand the same cap rate as a new multi-family project.