Underwriting has gotten tougher in multifamily, according to a new analysis from CBRE — at least for prime assets. That probably isn't a shock to many in the industry. Interest rates are up, as are concerns about property owners who purchased and set strategies when rates were very low and available leverage high.

What once could be rationalized by the ongoing rise of expected multifamily net operating income no longer can be. Rents are clearly decelerating and no one knows where the bottom will be. In the last quarter of 2022, the net percentage of domestic banks tightening standards for multifamily CRE loans was 36.4 percent, according to data from the Federal Reserve. They had been climbing all last year and absent some sudden turnaround, that percentage will keep climbing.

"The average multifamily going-in cap rate increased by 38 basis points (bps) to 4.49% in Q4 2022, exceeding the pre-pandemic Q4 2019 average of 4.16%," wrote CBRE. "Heightened market volatility and higher borrowing costs have pushed the cap rate up by 113 bps over the past nine months."