Are Multifamily Rates Going to Stay High?

By Terry Painter/Mortgage Banker, Author of The Encyclopedia of Commercial Real Estate Advice, member of the Forbes Business Council

As a commercial mortgage banker making commercial loans nationally since 1997,  I have worked during every economic cycle. I can remember when rates came down from 7.40% to 6.75% in 1999 and we thought this was amazingly great. Sadly, since March of 2022, all mortgage rates have been soaring at a time when property prices are unrealistically high. We are not technically in a recession right now because it hasn’t been declared as such. This is because unemployment is low, job growth is improving and GDP is good.

In my opinion —  as far as anything connected to real estate or lending is concerned, we are in a recession. Having mortgage rates in the sevens combined with high multifamily sales prices has been a financial disaster for investors, developers, real estate brokers and real estate lenders and mortgage brokers. The Feds have increased rates ten times since March of 2022 with the intention of lowering inflation from a high of  8.9% to 2%. In June 2023 inflation hit a low of 3% and then crept up in July to 3.2%; and in August up to 3.7%. So now that inflation is going in the wrong direction, the Feds are most likely to keep raising rates for a while.

I do predict that in the last two months of 2023 and during the first quarter of 2024, the Biden Administration will put pressure on the Feds to accept 3 - 4% inflation and lower rates again. This is because 2024 is an election year and this administration is being blamed for these high interest rates which are making many lives very difficult.  

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