Nearly four years after mortgage rates first surpassed 6 per cent since the peak of the 2008 financial crisis, borrowing conditions for homeowners and prospective buyers have remained stubbornly elevated, with no signs of imminent relief. The average US interest rate for a 30-year fixed mortgage rose from 5.89 per cent to 6.02 per cent in the week ending 15 September 2022. This was the first time since November 2008 that this threshold had been crossed. Mortgage rates reached highs of nearly 8 per cent at the end of 2023 and only briefly dipped below 6 per cent in the week ending 26 February 2026, before rising again with the onset of the war with Iran in late winter.
The latest Freddie Mac Primary Mortgage Market Survey recorded a weekly average of 6.66 per cent for 30-year loans in the week ending 27 August. This represents an increase compared to 6.56 per cent in the same period last year and stands in stark contrast to the 2.67 per cent rate recorded in December 2020. The reality of persistently high mortgage rates remaining for the foreseeable future has quickly taken hold among commercial real estate players. This creates another variable to consider alongside the associated increased interest and capitalisation rates.
Housing Market: From Challenge to Opportunity
While higher borrowing costs for home ownership have created downward pressure for some condominium developers, the multifamily and adjacent single-family rental sectors have benefited from the development. There are now more renters and fewer buyers in the market. Chad Tredway, Global Head of Real Estate at J.P. Morgan Asset Management, explained that the outlook for the multifamily sector remains “bright, primarily due to increasing rental demand from households who cannot afford home ownership.”
He noted that buying a home is approximately 50 per cent more expensive than renting one. This shift not only pushes more people into rental properties but keeps them there longer. Tredway pointed out that monthly mortgage payments for an average home have effectively doubled since before the COVID-19 pandemic. Mortgage rates rose from under 3 per cent at the end of 2020 to almost 7 per cent today, accompanied by an approximate 60 per cent increase in property values since 2019. According to Tredway, housing affordability is at its lowest level in a generation.
Demand for rental properties should also remain robust in the future, as interest rates, and thus mortgage rates, stay higher for longer. Tredway warned that the development pipeline for single-family homes is “shrinking,” with housing starts for owned homes declining by approximately 70 per cent, and also tending to be lower for multi-family homes. He emphasised that the weakening supply side will support the outlook for multifamily assets with healthy rental growth and boost deal flow in this sector.
Multifamily as Inflation Hedge and Market Differentiation
Mortgage rates rose in parallel with the Federal Reserve's aggressive interest rate hikes, which began in March 2022 from near-zero levels to combat inflation. Mortgage rates increased from around 3.2 per cent at the beginning of 2022 to almost 8 per cent at the end of 2023, as the Fed implemented rate hikes in 12 out of 13 meetings within 16 months. The Fed does not directly dictate mortgage rates, but interest rates are strongly influenced by the yield on 10-year Treasury bonds, which forecasts future monetary policy decisions. At the beginning of 2026, there were still hopes for Fed rate cuts, but the central bank recently signalled that further increases might be likely due to persistent inflationary pressures.
Another factor favouring the multifamily sector in the current environment of higher mortgage and interest rates is the asset class's reputation as an effective hedge against expected persistent inflationary pressures. Tredway explained, “although real estate generally serves as a strong inflation hedge, not all sectors are equal.” He added that the shorter lease terms in the multifamily sector, typically one year or less, allow rents to be adjusted more quickly than in other property types. This permits a swifter pass-through of inflation increases.
Current single-family home sales figures published by the Department of Commerce on 25 August showed a monthly decline of 10.5 per cent to a seasonally adjusted annual rate of 607,000 units. This also represents a 5.3 per cent reduction in home sales compared to the July 2025 rate of 648,000. The median sales price for newly sold single-family homes in July 2026 was USD 393,800, a decrease of 2.3 per cent from the previous month and 0.9 per cent less than in the same period last year, according to the Department of Commerce.
Shlomi Ronen, Founder and Managing Partner of the real estate investment firm Dekel Capital, sees higher mortgage rates as positive for the multifamily market, particularly in areas where the rent-versus-buy consideration plays a role. Ronen noted that newer luxury multifamily properties, in particular, have benefited from the environment of persistently high mortgage rates, with rental prices in these properties increasing. For condominiums, the elevated mortgage rates have not slowed developments where demand remains strong, including upscale projects in rapidly growing regions such as Florida and Texas, according to Ronen. He stressed that older condominiums in markets without strong demand will suffer more in the current mortgage rate environment.
Ronen explained that there is “a massive stratification of target buyers, and if you are in the luxury or ultra-luxury product space, most of those consumers are not the ones who are affected.” He added that it will be more of a problem for buyers who are “living pay cheque to pay cheque and have relatively fixed incomes. Affordability has slipped away from them because of the increased rates.”