Multifamily Values Not Driven Solely by Rent Growth

Inflationary pressures have declined significantly over the past year, and while the 10-Year Treasury rate is elevated compared to recent trends, it remains historically low, as seen in the chart below. Nevertheless, one of the reasons why multifamily property sales have been subdued this year is because of higher interest rates, yet multifamily capitalization rates (a measure of a property’s income relative to its value) have not changed significantly, increasing only 60 basis points to 5.3% as of third quarter 2023 from 4.7% as of third quarter 2022, according to data from MSCI Real Assets.

Read the December 2023 Market Commentary