The U.S. 10 Year Treasury recently dropped below 4.0%, for the first time since July of 2023. The 10 year treasury peaked in late October of 2023 before starting to drop at a rapid pace.
Also, last week, the Federal Reserve kept the federal funds rate unchanged at their December meeting for the third time in a row. They indicated that at least three rate cuts are likely planned for 2024. This will provide relief from the 11 rate hikes that occurred between 2022-2023.
Both are great news for commercial real estate buyers and sellers because when the 10 year treasury drops, interest rates also drop. From a buyer’s perspective, when interest rates drop, borrowing becomes cheaper and activity increases. From a seller’s perspective, when interest rates drop, values can increase.
In late October of this year, interest rates jumped into the low 8s, but have now dropped to the low 7s for multifamily loans . Historically, the current interest rates are healthy, but with how fast everything has been changing in the last 2 years, uncertainty remains for buyers and sellers.
Investors that bought apartment complexes in 2020-2021 with an interest rate of 3.25% or lower and have loan maturities due in the next 36 months may have challenges refinancing. We anticipate some distress with these assets, but overall the recent news from the Federal Reserve is positive heading into the holidays.
As with every cycle in the market, opportunities can be found for buyers and sellers. It is important to understand the current market trends and how to best position yourself as a buyer or seller of multifamily properties. Please reach out if you need any assistance or guidance.
SVN Cornerstone Multifamily Team
Nate Gant is an Advisor with SVN Cornerstone. Nate has been an active member of the Eastern Washington real estate community since 2010. He has brokered more than $100 Million in real estate transactions, specializing in land development, REO and investment properties. To get in touch with Nate, email nate.gant@svn.com or call 509.993.4440.
Jordan Lester is an Associate Advisor with SVN Cornerstone. Jordan served as a brokers assistant for 3 years with SVN Cornerstone before becoming a full time broker. Jordan specializes in the multifamily sector of commercial real estate. To get in touch with Jordan, email jordan.lester@svn.com or call 509.496.6922