Some of the nation's largest apartment owners are buying properties again.

Strong multifamily demand fundamentals and a slowdown in construction starts has sparked enthusiasm for the industry’s trajectory over the previous quarter. That positive sentiment has driven up transaction volume on a quarterly basis for the first time in a year.

Transaction volume topped $23 billion in the second quarter, according to CoStar data. Though that level is still below long-run historical averages, it still represents a 40% increase from the roughly $16.4 billion recorded in the first quarter of this year.

“While supply continues to outpace demand, specifically in Sun Belt markets such as South Florida and Atlanta, concessions resulting in more attractive rental rates have driven a resurgence in renter demand across markets in the first half of 2024,” said Juan Arias, CoStar’s director of market analytics in South Florida. “Healthy tenant retention, new leases and a strengthened conviction around the national housing shortage story have driven buyers back into the market.”

Among the companies that made purchases in the second quarter was Chicago-based Equity Residential. Citing less interest rate volatility as a prime motivator, the real estate investment trust purchased a 160-unit suburban Boston property completed in 2023 for $62.6 million.

A month into the third quarter, the company has already picked up two additional properties through acquisitions in Dallas and Atlanta. The combined $216.8 million purchase added 644 units to the REIT’s portfolio. Executives said the company is already under contract for a third acquisition in Denver totaling 202 units for a price of $77 million.

“We're open to buying existing streams of income and we're open to developing assets,” Mark J. Parrell, Equity Residential's president and CEO, said on the company’s second-quarter earnings call Tuesday. “But right now our lean is towards the existing assets, we think there's still going to be quite a bit sold.”

Parrell cited developers holding short-term bank debt as prime targets for acquisitions but added the transactions “may not quite be at the fire sale prices people expected a couple of years ago, but they're still going to be good values compared to replacement costs and we like that basis.”

To be clear, not all developers made purchases in the second quarter, and sales volume remains depressed relative to norms. One such company was UDR, which had no transaction activity as the spread between the cost of capital and potential returns remains a challenge.

“From an external growth perspective, going out there and acquiring [properties], isn't really something that makes sense for us in terms of levering up for minimal accretion,” Joseph Fisher, president and chief financial officer at UDR, said on an earnings call. He cited what he sees in the current market where rates of return on some properties could be lower than interest rates on debt.

Even so, a rise in sellers seeking liquidity is also creating attractive opportunities to buy, according to Arias.

Arlington, Virginia-based AvalonBay completed a $62.1 million acquisition of a 300-unit property in Lewisville, Texas, in June. The company has already purchased an additional two properties in North Carolina and Colorado in July that started its third quarter with a combined $161.5 million in purchases for 568 units.

Funding for the deals came from proceeds generated by the sale of five properties in the company’s coastal regions, and executives indicated there could be more trades on the horizon.

“We are hoping to do at least another $300 million or so of acquisitions before the end of the year. We could certainly do more,” Matthew Birenbaum, chief investment officer at AvalonBay, said on his company's earnings call Thursday. “We have more assets that we're going to bring to sale in the disposition market as well, but it depends on if we find assets that we like.”

The company said property sellers it has encountered either through purchases or failed bids have largely been institutional owners that bought the properties as far back as 2014 with capital from limited 10-year funds that have reached the end of their life. AvalonBay expects those sellers have already realized significant gains.

Mid-America Apartment Communities also began purchasing assets again after a quiet start to the year. The company closed on a 306-unit property in suburban Raleigh, North Carolina, for roughly $81 million. Two other properties are now in the due-diligence stage, and MAA expects to complete inspections and close on the purchases over the next few months.