Morgan Stanley is neutral on the group despite some obvious headwinds as it's likely the bad news has already been priced into the stocks.
First, there's supply pressure - Axios estimates 323K new units in 2014 vs. the 275K historical average and 184K last year. Supply increases may not be as detrimental as thought, however, thanks to average growth of just 125K units per year from 2010-2012.
Second, there's rising rates: Morgan Stanley notes multifamily has historically been the least impacted in the REIT sector from higher rates thanks to shorter lease terms.
Valuation? Multifamily REITs trade at a 14% discount to NAV vs. a 1% premium historically. The FFO multiple is 16.1x vs. the 10-year average of 18x, and the relative FFO multiple sigma of negative 1.6x also suggests the group's undervaluation compared to the broader REIT sector.