Multifamily Prices Could Stall With Interest Rate Hike via NREIonline.com

Apartment property prices may finally stop rising—and even begin to fall—when interest rates start going up.

“The assumption is that capitalization rates would jump higher with interest rates,” says Luis Mejia, chief multifamily economist with research firm CoStar Group.

But the rise in cap rates is likely to come very, very slowly. Cap rates on apartment properties have been going from low to lower for years as apartment prices climbed steadily higher. However, federal officials might soon make a change to benchmark interest rates—the Federal Reserve had strongly hinted it might raise rates at its September meeting. Bad news from the world economy delayed the action, but officials are still likely to raise rates by the end of the year. Higher interest rates usually mean higher cap rates.

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