Amid Higher-for-Longer Mortgage Rates, Multifamily Pros Find a Silver Lining

Nearly four years after mortgage rates surpassed 6 percent for the first time since the height of the 2008 financial crisis, borrowing conditions for homeowners and prospective buyers have remained stubbornly elevated with no signs of abating anytime soon.
The average U.S. 30-year fixed mortgage rate went up to 6.02 percent from 5.89 percent  for the week ending Sept. 15, 2022, marking the first time since November 2008 it had crossed that 6 percent threshold. Mortgage rates eventually spiked to near 8 percent in late 2023 and only briefly came down just below 6 percent for the week ending Feb. 26, 2026, before soaring once again once the war with Iran started in late winter. SEE ALSO: A COGE Member On How New York City Can Boost Affordable Housing
The latest Freddie Mac Primary Mortgage Market Survey reported a weekly average for 30-year loans of 6.66 percent for the week ending Aug. 27, up from 6.56 percent in the year-ago period and in stark contrast to the 2.67 percent rate seen in December 2020. 
The reality of higher-for-longer mortgage rates persisting for the foreseeable future has quickly settled in for commercial real estate players, creating another variable to contend with along with inter-related elevated interest and capitalization rates. 
While the higher home-borrowing costs have created downward pressure for some condominium developers, the multifamily and adjacent single-family rental sectors have been a beneficiary, with more renters and fewer buyers in the market now.
“The outlook for multifamily remains bright, largely due to rising rental demand from households priced out of homeownership,” said Chad Tredway, global head of real estate at J.P. Morgan Asset Management. “Buying a home is approximately 50 percent more expensive than renting a house. This shift is not only pushing more people into rentals, it’s also keeping them there longer.”
Tredway noted that monthly mortgage payments on the median home have effectively doubled since before the COVID-19 pandemic, with mortgage rates climbing from below 3 percent in late 2020 to just under 7 percent today, coupled with a roughly 60 percent increase in home values since 2019. Housing affordability is now at its lowest level in a generation, Tredway noted.
Rental housing demand should remain strong going forward as interest rates and, by extension, mortgage rates remain higher for longer. Tredway cautioned that the single-family home development pipeline is “contracting” with home construction starts down roughly 70 percent and trending lower for multifamily properties. He stressed that the weakening supply will support the outlook for multifamily assets experiencing healthy rent growth and boost deal flow in the sector.  
Chad Tredway. PHOTO: Paul Quitoriano/for Commercial Observer
Mortgage rates have spiked concurrently going back to when the Federal Reserve began aggressively hiking interest rates from near-zero borrowing levels in March 2022 to combat inflation. Mortgage rates rose from around 3.2 percent in early 2022 to that nearly 8 percent at the end of 2023, when the Fed implemented rate hikes in 12 out of 13 meetings in 16 months. 
The Fed doesn’t directly dictate mortgage rates, but rates are heavily influenced by the 10-Year Treasury yield that forecasts future monetary policy decisions. There was some hope of the Fed cutting rates when 2026 began, but the central bank has recently signaled future hikes might be likely due to persistent inflation pressures. 
Another factor favoring multifamily in the higher mortgage and interest rate climate is the asset class’ reputation as an effective counter to expected prolonged inflationary pressures.
“While real estate broadly serves as a strong inflation hedge, not all sectors are equal,” Tredway said. “Multifamily’s shorter lease terms, typically one year or less, allow rents to reprice more quickly than in other property types, enabling a faster pass-through of any inflationary increases.”
The latest single-family home sales figures released by the Commerce Department on Aug. 25 showed a 10.5 percent monthly drop to a seasonally adjusted annualized rate ?of 607,000 units. That also represented a 5.3 percent reduction in home sales from the July 2025 rate of 648,000. The median sales price of new single-families sold in July 2026 was $393,800, a 2.3 percent month-over-month drop and 0.9 percent less than the year-ago period, according to the Commerce Department. 
Shlomi Ronen, founder and managing principal of real estate investment firm Dekel Capital, said higher mortgage rates have been a positive for the multifamily market, particularly in areas where there is a close calculation of owning versus renting. Ronen noted that newer, luxury multifamily has especially benefited from the higher-for-longer mortgage rate environment, with rental rates going up in these properties.
With condominium properties, elevated mortgage rates have not slowed developments where demand remains strong, including for upscale projects in fast-growing places such as Florida and Texas, according to Ronen. He stressed that older condos in markets without strong demand will suffer more in the current mortgage rate environment.
“You’ve got a massive stratification of target buyers and, if you’re in the luxury, ultra-luxury product type, most of those consumers aren’t the ones that are being impacted,” Ronen said. “It will be more of an issue for your paycheck-to-paycheck kind of buyers that are on relatively fixed incomes. Affordability has gotten away from them as interest rates have moved up.”
While mortgage rates have been elevated compared to where they sat in the early 2020s, they historically are low compared to their 18.63 percent peak in mid-October 1981, according to data from the Freddie Mac Primary Mortgage Market Survey. The average weekly mortgage rate peaked above 10 percent in 1990 and also rose above 8 percent in 2000, before gradually falling to between 5 and 6 percent by the middle of the decade. 
Melissa Farrell, managing director and head of U.S. debt originations for PGIM’s real estate business, said lending for multifamily has been strong in 2026 despite not much activity on the acquisition front, with a number of property owners seeking refinancings. Multifamily has accounted for 65 percent of PGIM’s transitional and high-yield strategies, up from around 55 percent last year. Farrell said that reflects how a number of borrowers are in need of bridge debt to address challenges posed by higher interest rates and inflation.
Multifamily property owners are looking for floating-rate debt in hopes that interest rates will eventually trend downward, Farrell added. Multifamily rents should also be helped by higher mortgage rates driving more prospective buyers to rent, she added — and all against the backdrop of landlords encountering some financial stress, particularly in areas like the Sun Belt, where oversupply materialized prior to interest rates rising.  
Matt Ferrari. PHOTO: Josh Ritchie/for Commercial Observer
“There’s a positive outlook for multifamily, but right now it is feeling some pressure,” Farrell said. 
And about that trend downward? The Federal Open Market Committee (FOMC) maintained its benchmark interest rate in late July at between 3.5 percent and 3.75 percent for the fifth straight meeting this year. Federal Reserve Chair Kevin Warsh, who assumed the role in late May, said in remarks at the central bank’s Jackson Hole, Wyo., conference in late August that inflation has not meaningly improved, leading to increasing odds of a 25 basis point hike at the next FOMC meeting Sept. 16. 
Matt Ferrari, who last year launched investment firm PXV Multifamily, said there are strong discount buying opportunities in the rental housing sector in areas of the country where there is often a lack of supply, such as the East Coast and the Midwest.
Ferrari, a former chief investment officer at TruAmerica Multifamily, said that while demand for apartments is strong overall, headwinds remain in pockets of the Sun Belt. Owners there have been forced to offer rental concessions due to that oversupply. He said while a decrease in construction starts in the Sun Belt has leveled off supply a bit, two months of free rent is often the norm in some areas — in stark contrast to other markets where there is an undersupply of rental housing.
“There’s a tale of two cities in the country,” Ferrari said. “There’s the high-regulation markets where less development has occurred where you have rents going up because those markets scare off developers and capital, and then you have the low-regulation markets where it’s easier to build and they’re oversupplied and rents are going down substantially.”
Andrew Coen can be reached at acoen@commercialobserver.com.