The small multifamily market has begun to pick up again, according to an Arbor Realty Trust analysis. But future monetary policy looks less accommodative, which could interrupt the normalizing trend.
Valuations of small multifamily properties started to rise again in 2024 Q3 and Q4 and origination volumes were up 5%. But things started to change toward the end of the year. Long-term interest rates began to increase as yields on the 10-year Treasury began to climb. They came down into early March, but then reversed and started to climb again as new tariffs took effect.
That caused the small multifamily market to become more cautious as cap rates and debt yields rose and loan-to-value ratios dropped. However, the sector is “positioned for stability” because of the need for affordable housing in the U.S.
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