Buyer confidence in the multifamily sector has strengthened, signaling early signs of renewed optimism as capital market conditions began to ease. According to CBRE’s latest Multifamily Underwriting Survey, sentiment among both core and value-add buyers improved in the third quarter, while underwriting assumptions remained largely steady, following the Federal Reserve’s September interest rate cut.
Although the rate reduction was not enough to immediately unlock deal flow, CBRE said it helped bolster confidence that further cuts could shift market dynamics in the months ahead. The firm expects investment volume to rise with additional rate decreases, along with potential incremental cap rate compression as long-term bond yields stabilize.
Sentiment among core-asset buyers rose notably, with 64 percent expressing a positive outlook in the third quarter, up from 57 percent in the previous quarter. Just five percent reported a negative view, while seller sentiment was more moderate, with slightly more than half remaining neutral and 28 percent bullish. CBRE described core-buyer sentiment as “substantially more positive” than at the end of 2024.
Value-add buyers posted even stronger improvement, with positive sentiment increasing from 62 percent in the second quarter to 70 percent in the third. Sellers were considerably more restrained, with 14 percent positive, 66 percent neutral and 18 percent negative. The divergence between buyer and seller outlooks suggested that transactions occurred in a more buyer-leaning environment, shaped by refinancing pressures and lower property valuations. According to CBRE, confidence improved most in Sun Belt markets such as Atlanta, Miami and Nashville.
Key underwriting metrics showed only modest movement. The average going-in cap rate for core multifamily assets edged down by two basis points from 4.75 percent in the second quarter to 4.73 percent in the third. Exit caps also declined slightly, from 4.96 percent to 4.95 percent, while the core unlevered internal rate of return target held firm at 7.70 percent. CBRE noted that going-in and exit cap rate trends now resemble early 2023 levels. The firm expects the spread between them—currently 22 basis points—to widen gradually through 2027, assuming continued rate cuts support further going-in cap rate compression. However, CBRE said it may take time before the spread returns to a more typical range of 50 to 60 basis points.
Out of 19 tracked markets, 15 maintained stable IRR targets for core assets. Chicago and Nashville recorded modest declines to ranges of 7.50–8.00 percent and 7.00–8.00 percent, respectively, while Austin and Dallas saw increases to 7.50–9.00 percent.
Overall, CBRE described underwriting metrics as “relatively firm.” High demand for multifamily properties continued to drive competitive bidding, narrowing the bid-ask gap even as many owners held off on selling. CBRE expects more investors to bring assets to market in the fourth quarter and into 2026, assuming financing conditions continue to improve as anticipated.
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