PHOENIX (Sept. 21, 2023) — On Sept. 20, the Federal Reserve and Federal Open Markets Committee took a pause on increasing interest rates further — bringing relief to some of the multifamily industry.
Brandon Harrington, senior vice president and managing director of Debt + Equity in Northmarq’s Phoenix office, spoke with Multi-Housing News (MHN) on that topic for the article, “Multifamily weighs in on another rate pause.”
Harrington said previous rate hikes have increased interest rates on new acquisitions and refinancings, causing buyers to be conservative on their debt assumptions.
“Additionally, the rising cost of capital is making it tougher for new development projects to pencil,” he said. “Lenders are more cautious about new construction loans, the costs are often prohibitive, and this is restricting new development.”
Harrington noted this could be a positive for existing operators due to competition from future construction potentially slowing in the latter half of 2024 and into 2025.
“If maturities on expiring low interest debts are coming due in the near term,” Harrington said, “it will require owners to either put additional equity into deals if the owners want to maintain them or if they don’t have the equity or are unwilling to invest the equity, it’s going to create motivated sellers from either owners offloading or lenders looking for a new general partner with fresh equity,” he said.
Topics covered in the article include:
- Impact on financing.
- Demand remains strong.
- End-of-year predictions.