As expected, the Federal Open Market Committee held interest rates steady on Wednesday, following its two-day October meeting. 

Despite two dissenters who voted to raise the federal funds rate target range by 0.25 percentage points, the FOMC kept it at 3.75% to 4%. 

For the apartment industry, the news was welcome after the FOMC hiked the federal funds rate target range by 25 basis points in September. “Expectations are clearly for the Fed to stand pat, which helps,” Jeff Brown, CEO and co-founder at T2 Capital Management, told Multifamily Dive in emailed comments ahead of the Fed’s announcement. 

In a press conference following today's announcement, Kevin Warsh, chair of the Federal Reserve, said the goal was to deliver price stability. He also announced a change to the Fed’s 2028 schedule. It will still meet eight times, but only six will set policy.

“As we widen the frame to survey the broad economic and financial picture, real activity is clearly pointing in the right direction,” Warsh said. “That's good news. But inflation is too high.” 

Multiple multifamily owners and investors said they would watch the announcement closely, even if they don’t expect relief anytime soon. Instead, they wanted to understand what could be coming late in the year and in 2027.

Trickle-down effect

After multiple rate cuts in 2025, the Fed held rates steady before raising them in September, a move that affected the multifamily market. While “cap rates have moved out since the September meeting,” sellers are slow to accept it, said Tyler Chesser, the co-founder and managing partner of CF Capital.

“Historically it takes a few quarters for seller expectations to catch up to the market,” Chesser said. “Until they do, the bid-ask gap means a lot of deals stall, get retraded, or die. I’d expect volume to stay thin through year-end, especially if the Fed signals a December hike.”

Smita Garg, principal of investments and asset management at apartment owner and manager SKG Capital, said her firm was closely watching the Fed’s announcement because it “was actively evaluating and executing transactions where today’s cost of capital has a direct impact on pricing and returns.”

“Higher borrowing costs continue to make multifamily transactions more difficult to execute,” Garg told Multifamily Dive in emailed comments. “Financing costs directly affect what buyers can pay while still achieving appropriate returns, and sellers have not always adjusted expectations to the same degree. That disconnect continues to limit transaction volume.”

Forward outlook

In its statement, the Federal Reserve said economic activity is expanding at a strong pace, and domestic spending has been resilient, despite geopolitical uncertainty. 

“Productivity growth is strong, and capital investment is robust,” Warsh said. “Job gains have kept pace with the workforce, and the unemployment rate has changed little.”

Financial and credit conditions have tightened for some businesses and households after September’s rate hike, according to Warsh.

“Market participants are becoming somewhat more discerning in their capital allocations, and while overall financial conditions are tighter, I'm unwilling and unable to call them tight,” Warsh said. “But broadly, these developments go in the direction of achieving a longer, more durable period of economic growth and price stability.”

Still, Warsh said multiple times that inflation remains elevated. “Energy and related prices have moved higher again in recent weeks, and our job is to ensure that relative price changes in some sectors do not broaden out across the economy, and that inflation expectations remain as they are anchored,” he said.

Warsh said more information is needed before the Fed decides to raise rates again, noting that indicators like oil futures were continuing to rise. “Ensuring price stability … quashing inflation, is not about some fixed individual date on a calendar,” Warsh said. “[The] same way, it's not about some isolated data point.”

Tone matters

For apartment observers, Warsh’s comments seemed to matter more than the Fed’s decision. Chesser wasn’t surprised by the rate pause, but he wanted to know what comes later.

“After September’s hike, the market is trying to read whether another one comes in December, and Chair Warsh’s tone will move the 10-year Treasury more than the decision itself,” Chesser said. “That matters for us because most apartment debt is priced off Treasuries, not the Fed funds rate.”

Like Chesser, Garg was also watching Wednesday’s announcement to decipher the Fed’s roadmap into 2027.

“For us, the more important question is not necessarily this week’s decision, but the direction of rates over the next six to 12 months,” Garg said. “Greater visibility around the rate path would help bring more certainty back to underwriting and ultimately help buyers and sellers close the gap on pricing.”

Regardless, some firms are preparing for higher rates to stick around. “I don't know that we're going to see material drops in rates over the near term,” Greg Cavanaugh, senior vice president of development for the mid-Atlantic region at Bainbridge, told Multifamily Dive.

Even with Wednesday’s announcement and Warsh's comments, Chris Nebenzahl, CBRE's Americas head of multifamily research, said the market might not have a clear picture for a few more months.

"Greater clarity around the rate outlook should materialize in early 2027, helping bring buyers and sellers back together, improving price discovery and supporting higher transaction volume as investors gain confidence in the market,” he said in emailed comments.

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