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The highly anticipated transition from LIBOR® to SOFR, which goes into effect after June 30, 2023, will make SOFR the standard benchmark rate across a wide range of financial products. Although the financial community is expecting a smooth transition, there are notable differences between the two rates that will influence multifamily lending.

The small multifamily sub-sector remains in a favorable position to withstand macroeconomic instability.

In the last quarter of 2022, the multifamily sector continues to thrive despite ongoing economic uncertainty. As the investment community looks ahead to 2023, Arbor’s Managing Director, Senior Production Officer Jean-Laurent Pouliot discusses what’s in store for multifamily and how Arbor is positioned to help investors continue to exceed expectations next year.

Arbor’s latest Affordable Housing Trends Report, produced in partnership with Chandan Economics, examines the affordable housing market’s growth trajectory in a challenging economic climate.

Multifamily rent growth remained strong in the San Antonio market during the third quarter of 2022, although began showing deceleration from the most recent record highs measured earlier in the year. Barriers to homeownership continued to drive rental demand, as vacancy rates reached all-time lows.

With the latest release of the Consumer Price Index (CPI) report from the U.S. Bureau of Labor Statistics (BLS), policymakers and consumers alike found signs of inflation relief for the first time in a long time. Despite the CPI’s overall improvement in October, one notable price category is still seeing rising inflation: rent of primary residence. The annual growth rate for the rent component of the CPI has now increased for 15 consecutive months.

The single-family rental (SFR) market maintained a favorable outlook in the third quarter of 2022 as the national housing market began cooling. Amid economic headwinds, SFR is well-positioned as a primary alternative for would-be homebuyers priced out of ownership in today’s high-interest-rate housing market.

The U.S. multifamily market continued to expand during the third quarter of 2022, although at a more modest pace. Additionally, some new areas have shown up on the list of top rent growth markets.

With investors now seeking inflation protection, the small multifamily sector continues to see gains. Arbor’s new quarterly Small Multifamily Investment Trends Report, published in partnership with Chandan Economics, sheds light on key trends, including firm cap rates, climbing valuations, and elevated originations, despite tightening underwriting standards.

The U.S. multifamily market continued to expand during the third quarter of 2022, although at a more modest pace.