Distress buyers of multifamily assets are no doubt frustrated. Despite the high level of troubled loans in the sector, distress has stayed low as most multifamily loans are being extended. However Yardi Matrix has identified a few category of deals that are unlikely to rightsize even with another year or two of cankicking: Value-add deals financed with short-term debt in 2020–22, value-add deals owned by syndicators that lack the financial wherewithal to pay down loan balances or fund reserves in exchange for extensions, and construction loans in high-growth Sun Belt markets that are taking longer to lease up as a result of huge supply pipeline.

These have made up much of the distress seen in multifamily to date, which as stated, has been low. According to the National Multifamily Housing Council, citing FDIC data, the percentage of non-current multifamily loans doubled to 0.3% in 2023. By way of perspective, in the wake of the global financial crisis, the rate peaked at 4.7%, Yardi pointed out.

But it is possible that more distress could materialize, depending on how the capital markets play out over the next year. For example, Yardi says that if the 10-year Treasury yield falls to the low-4% range or less, transaction activity will resume, borrowers will refinance loans more easily and much distress will be avoided.