Federal Reserve holds interest rates steady at 3.75% to 4%
The Federal Reserve held interest rates steady on Wednesday.
The short version
- Two members voted to raise rates by 0.25 percentage points.
- Borrowing costs remain high for apartment owners and buyers.
- Sellers have been slow to adjust their price expectations.
- Deal volume may stay thin through the end of the year.
Apartment investors tuned in on Wednesday as the Federal Reserve, the central bank of the United States, held interest rates steady at 3.75% to 4%. The decision followed a two-day October meeting and offered a pause after the Fed hiked rates by 25 basis points in September.
Two committee members dissented, voting to raise the target range by 0.25 percentage points. In a press conference following the announcement, Kevin Warsh, chair of the Federal Reserve, said the goal was price stability and that inflation remains too high. According to Multifamily Dive, the news did not surprise apartment investors watching for future rate signals.
Higher borrowing costs continue to make apartment transactions difficult to execute because financing costs affect what buyers can pay. Tyler Chesser, the co-founder and managing partner of CF Capital, said it historically takes a few quarters for seller expectations to catch up to the market.
Until sellers adjust, a gap between buyers and sellers means deals stall, get retraded, or die. Smita Garg, principal of investments and asset management at SKG Capital, said her firm was closely watching the announcement because current capital costs directly impact pricing and returns.
Warsh also announced a change to the Fed's 2028 schedule, moving to six policy-setting meetings out of eight total gatherings. Most apartment debt is priced off 10-year Treasury yields rather than the federal funds rate, making the Fed chair's tone critical for underwriting new deals.
Greater visibility around the rate path will help buyers and sellers close the pricing gap over the next six to 12 months.
