Multifamily interest rates are tied directly to the 10 year treasury. Lending institutions take the current 10 year treasury and require a 200-300 basis point spread to calculate the current interest rate they are willing to offer a borrower on a mortgage.
Every lending institution is different and normally the larger national lending institutions are more conservative with their spread (usually in the 250-300 basis point spread range), while regional lending institutions can be more aggressive to try and win more business (usually in the 200-250 basis point spread range). When the Federal Funds rate drops, the 10 year treasury usually follows suit. Below is a graph of the 10 year treasury over the past year. The current 10 year treasury sits at 3.84%.
Interest rates for multifamily properties have improved significantly in the last month. There have also been indications of a 25 basis point federal funds drop at the September 17-18th meeting, which will likely keep multifamily interest rates moving down. I spoke with two lenders in Spokane this week and their current multifamily interest rates are 6.5% and 6.53%, the lowest they have been this year. These loans are typically amortized over 25 years and have a 5, 7, or 10 year term.
With the recent drop in interest rates and an indication of more drops in the near future, activity on commercial real estate has picked up in the last month and is currently the most active it has been in 2024. Interest rates are one of the factors that affects pricing for multifamily properties and has recently allowed more buyers to come back into the market, creating more demand.
I anticipate activity to continue increasing in the near future, which is why buyers should be looking move on the market now and capitalize before competition gets too high. Now that the market is attracting a larger pool of buyers, this is also an opportunity for sellers who have been hesitant about listing their properties.
If you are looking to buy or sell apartment complexes in the Spokane area before the end of the year, please reach out to me ASAP and we will make a push to finish 2024 strong!
SVN Cornerstone Multifamily Team
Jordan Lester, CCIM, MBA joined SVN Cornerstone as a Commercial Real Estate Broker in 2022. Jordan specializes in advising clients with the acquisition and disposition of multifamily investment properties. With a primary focus in Spokane County and an expert understanding of the latest market trends, Jordan is committed to maximizing his client’s financial goals to achieve their real estate objectives. Jordan began his real estate career as a broker’s assistant for three years with SVN Cornerstone, which gave him valuable knowledge and experience to jumpstart his career as a broker. To get in touch with Jordan, email jordan.lester@svn.com or call 509.496.6922