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Rising Rates Curb Frothy Apartment Market
May 17, 2022
After a long run of record sales volume, sky-high valuations and rapid-fire deal-making, a reset in investment behavior is beginning to take hold in the multifamily sector.
As the Federal Reserve raises interest rates to cool inflation, the pandemic-era party is slowing down, market pros said. Rising rates translate to more expensive financing, prompting once-aggressive buyers to rethink assumptions. Deals are still getting done, but buyers are pushing back on pricing, with bids coming in anywhere from 5% to even 15% below expectations. And some deals are falling apart or being rewritten with lower prices.
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As the Federal Reserve raises interest rates to cool inflation, the pandemic-era party is slowing down, market pros said. Rising rates translate to more expensive financing, prompting once-aggressive buyers to rethink assumptions. Deals are still getting done, but buyers are pushing back on pricing, with bids coming in anywhere from 5% to even 15% below expectations. And some deals are falling apart or being rewritten with lower prices.
