How multifamily buyers, sellers are navigating rising Treasury yields

Eastham Capital has been circling a bank-owned property in the Midwest for a little while now, according to founder and managing partner Matt Rosenthal. The company has done due diligence, but rates are up 75 basis points since it signed the contract.

However, despite the potential Rosenthal sees in the asset, the Boca Raton, Florida-based apartment owner isn’t ready to take over the apartment community quite yet. 

“We’re not going to do it unless we can get a little bit of a retrade,” Rosenthal said. “We’re not going to cover the increased interest expense from contract signing to the deal.

Rosenthal’s experience is a story all too familiar to multifamily investors. “The one thing that the market hates the most is uncertainty and here we are again with more uncertainty,” Jon Siegel, co-founder and chief investment officer at Bethesda, Maryland-based apartment owner RailField Partners, told Multifamily Dive in emailed comments.

With the yield on the 10-year U.S. Treasury, a benchmark used to price multifamily loans, rising, deals have become much harder to pencil out. However, some buyers still see an opportunity to make deals as rental fundamentals stabilize in some metros and more distressed properties come to market. But even then, they have to remain laser-focused on rates.

“We’re watching the five-year and the 10-year religiously,” Chris Manley, president of Denver-based owner Grand Peaks, told Multifamily Dive. “You need to be very thoughtful about when to lock in rates and do it as soon as possible.”

A 6-month problem

At the beginning of the year, apartment dealmakers were hopeful the market was finally starting to loosen. After January and February, they grew more optimistic.

“Before the Iran conflict, the 10-year dipped below four [percent],” Rosenthal said. “It was literally 3.9%, and everyone was saying, ‘two rate cuts this year, and we’re back. This is going to be amazing.’”

But then the Iran conflict began in March, and the yield on the 10-year Treasury jumped roughly 75 basis points and “ground the deal market to a halt,” according to Rosenthal. Since then, he said the “gradual freeze” in the transactions market has turned into an “iceberg.” 

Others see similar problems. “I think that everyone is putting on a brave face, but the bond market and the impact on rates is definitely working its way into the deal market already,” Siegel said.

Earlier this month, the yield on the 10-year Treasury hit 4.8% — its highest level since 2023. “With rates at these higher levels, we would expect a slowdown in origination, development, and sale activity,” Sharon , president of multifamily debt and structured finance for New York City-based Newmark’s Multifamily Capital Markets Division, told Multifamily Dive in emailed comments.

When rates hit those levels, getting a deal to pencil out essentially becomes a math problem, according to Siegel. Buyers are either lowering their bids or dropping out because of the uncertainty or because their models no longer work.

“When one of the inputs like rates goes up, the output of value goes down,” Siegel said. “I think that people have gotten comfortable with the idea of rates being ‘higher for longer,’ but nobody thought that we were going to see treasuries go past the upper bound and that is making people pretty nervous.”

Though he’s delaying his own deal, Rosenthal has seen this phenomenon as a seller, as well. “We’ve had properties that we put out there that we were trying to sell, and we’ve gotten one bid or two bids. People are not even close to what we think it should be.”

Navigating the volatility

Still, despite concerns that transactions are grinding to a halt, some apartment properties, especially those facing some level of stress, are still being sold. A large share of multifamily loans originated during the low-rate era of 2021 and 2022 will mature in 2026 and 2027, forcing owners to refinance, recap or sell, according to Karaffa.

“We have seen an increasing share of multifamily transaction volume being maturity-driven rather than opportunistic, with sponsors refinancing or selling because they must,” Karaffa said.

Other buyers are finding ways to navigate the chaos. Grand Peaks’ Manley, who recently bought a property in Beaverton, Oregon, told Multifamily Dive that spreads are compressing, helping mitigate the cost of higher five- or 10-year Treasury yields. 

“It’s very tough, but there is a lot of debt capital out there for low- to moderate-leverage products,” Manley said. “But you definitely have to be disciplined in today’s environment.”

Top 50 owner TruAmerica Multifamily “underwrites around, rather than being sidelined,” by bond market volatility, according to Chief Investment Officer Noah Hochman.

“While rate movements have added complexity to financing and pricing decisions, we’re beginning to see a reversal in property performance at select assets and submarkets, with growth reemerging in pockets of the market,” Hochman told Multifamily Dive in emailed comments.

With that operating momentum and a “rapidly thinning new supply pipeline,” cap rates are staying relatively steady, giving TruAmerica greater confidence to make deals.

“Rather than waiting for perfect conditions, we remain focused on disciplined underwriting and identifying submarkets where these ‘green shoots’ and constrained supply can support durable performance, even amid near-term rate volatility,” Hochman said.

Siegel is hearing about some buyers looking at variable-rate executions to avoid dealing with the increase in Treasury yields, even amid chatter about those rates continuing to rise. “We are taking a cautious approach ourselves and all of the cushion that we built in models expecting that rates wouldn’t go past, say a 4.75% 10 year, is gone,” he said. 

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