The broader economic landscape adds to the complexity. As inflation shows signs of cooling and unemployment edges up, there’s ongoing speculation about the Federal Reserve’s next steps. The Federal Open Market Committee (FOMC) has three meetings left this year, and opinions are split on whether there will be further rate cuts. These decisions will hinge on upcoming data related to inflation and employment.
Woodwell also noted that commercial mortgage originations tend to follow property prices closely, and the uncertainty around interest rates has been a major reason for the recent slowdown.
“Many investors hold off selling or refinancing a property in the hope of lower rates,” he explained. “With longer term rates now lower, many of those players are likely to take action. Investors looking to shorter-term financing can also take solace in signs from the Federal Reserve that they will soon begin bringing down the short end of the curve.”
Multifamily lending is also set to increase, with projections showing a rise to $297 billion this year, compared to $246 billion in 2023. The MBA anticipates even stronger growth in 2025, with total lending potentially reaching $665 billion, of which $390 billion could come from multifamily loans.
Read next: New Fannie Mae tenant protections coming in 2025 for multifamily rentals
