Navigating the Multifamily Market as Prices Fall & Interest Rates Rise

While year-over-year housing prices increases remain jaw-dropping, the latest S&P CoreLogic Case-Shiller indices indicate housing price growth slowed more the two percent in September alone. Further, a survey issued by apartment search engine Zumper reports that “the two-bedroom median is down or flat in 60% of our top 100 cities.”

Nowhere is this churn more evident, perhaps, than the seesawing multifamily market, which began 2022 on a high but is closing the year out at a “virtual standstill.”  So, how can aspiring buyers navigate the market during such a large-scale transition? 

First, recognize the potential upside. 

As Bloomberg notes, amidst record high inflation and a proactive Fed jacking up interest rates to fight it, “any sign of a rental cool-off is welcome news.”

Why? 

A third of the Consumer Price Index (CPI), integral to future Fed moves, is tied to housing costs. It could take half a year or more for the CPI to register the shift in prices, but in an environment in which third quarter demand for new apartments is negative for the first time in thirty years, the economic picture—from inflation to interest rate policy to the depth of a potential recession—could me much more favorable to buyers.

Second, we’ve been in a seller’s market for so long, complete with bidding wars and take-it-or-leave-it attitudes, it’s easy to forget what it’s like when roles are reversed. Less demand not only means sellers will be doing more upfront work to make properties appealing and functional for buyers, but also will have greater incentive to agree to concessions on, say, closing costs or requests during the inspection process. 

Which is to say, once again buyers can think more holistically about the process.

Finally, meeting a diversity of challenges requires a diversity of experience. As buyers find themselves in a volatile sea of interconnected markets, engaging the right lender is more important than ever—a safe port in the storm, to continue the analogy. 

As the “note selling” model of financing loses steam in an era of rising interest rates—read our blog on that topic here—a lender willing and able to put its own funds at your disposal quickly, efficiently, and affordably can be a major advantage.

As Florida’s leading balance sheet lender, A&S Capital provides direct financing on single and multifamily residential real estate throughout the country. Our team of seasoned, versatile professionals can help you secure tailored, bespoke solutions designed to channel the right lending to the right deals at rates that are fair and favorable.