Another warning sign that harkens back to the epic collapse of the housing market in 2008 has emerged in the multifamily sector in recent weeks as interest rates have risen: negative leverage is back.

Negative leverage is a phenomenon that occurs when asset prices skyrocket quickly, shrinking return rates for buyers despite record rent hikes. Then interest rates rise quickly, creating an imbalance that sees initial return rates for new multifamily investments fall a percentage point or more below the interest rate on the mortgages for the property.

In other words, landlords are making less money on their apartment buildings than their banks.

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