Multifamily investors are still raising money and hunting for deals, but the financing landscape is making it harder to get transactions across the finish line. Debt costs are moving higher instead of lower, lenders are growing more selective and a growing share of capital is being steered into refinancings and loan workouts rather than new acquisitions, according to Yardi Matrix's May national multifamily report.
Capital Is Ready, But Deals Lag
On the surface, demand for multifamily hasn't gone away. A recent global capital study by brokerage firm Colliers found that multifamily in North America generated $174 billion in investment on a two-year rolling basis through the first quarter of 2026, representing about one-third of all funds allocated to commercial real estate and $50 billion more than the second-place asset class, industrial.
At the same time, transaction volume is underwhelming. Through the end of May, Matrix recorded $26.6 billion in multifamily transactions, down 10.7% from the $ 29.8 billion in sales completed during the same period a year ago. "Year-over-year transaction activity clearly is muted," Matrix stated.
That disconnect comes down largely to seller behavior and the cost of debt. Many owners are waiting for lower mortgage rates that would support higher prices and lower acquisition yields. Apartment sales hit a cycle peak of $233.2 billion in 2021 when fixed mortgage rates in the sector were in the 3% to 4% range, according to the report. As rates jumped by 200 to 300 basis points in 2022, the cost of capital rose and property values fell an estimated 15% to 20%, contributing to a steep drop in sales to $69.6 billion in 2023 before a partial rebound to $98.1 billion in 2025.
Rates Move The Wrong Way For Buyers
Heading into 2026, the consensus was that interest rates would drift down and help restart deal flow. Instead, the rate story has flipped. Inflation has picked up, the federal deficit has grown and the closing of the Strait of Hormuz has added geopolitical risk and pushed energy prices higher.
Those macro pressures are showing up directly in multifamily. "The war in Iran has fueled inflation, uncertainty and higher Treasury rates, prompting transaction volume to decrease rather than increase," Matrix stated. For buyers and sellers trying to agree on pricing, the volatility in the benchmark rate makes it hard to lock in assumptions.
CMBS Backs Away From Smaller Deals
One of the clearest signs that debt markets are complicating deal-making is the way securitized lending is behaving. CMBS remains a viable option for larger loans, but it is being "frozen out" of smaller deals because coupons are too volatile, the report said. When spreads and base rates move quickly, borrowers on modestly sized assets have little visibility into all-in costs until late in the process, which can cause deals to reprice or fall apart.
For institutional buyers working on large, programmatic transactions, CMBS remains in the toolkit. For smaller sponsors targeting mid-market properties, the window is much narrower. That split adds another layer of bifurcation to an already uneven market, where access to financing increasingly depends on deal size and sponsor profile.
Agencies Focus On Refinancing
Agency lenders are still very much in the game, but their focus is also shaping where capital goes. Fannie Mae and Freddie Mac are expected to get close to their 2026 allocations of $88 billion apiece, but the report said much of that activity is coming from refinancings rather than property sales. In other words, the agencies are helping existing borrowers extend their terms or restructure their debt, but they are not driving a surge in acquisition lending.
That tilt toward refinancings keeps the multifamily system functioning and supports values, but it also limits the amount of fresh credit available for buyers trying to take down new deals. For would-be acquirers, it means more competition for agency dollars earmarked for purchases and a greater need to line up alternative capital sources.
Debt Funds Turn To Loan Workouts
Debt funds, which were expected to play a bigger role in acquisition finance as banks pulled back, are pivoting as well. According to the report, many of these lenders are concentrating on restructuring problematic bank loans, often with the original banks still in the capital stack on the reworked deal. That focus on workouts absorbs balance-sheet capacity and risk appetite that might otherwise be directed toward new originations.
For equity investors, that shift matters. Rather than writing new checks to support purchases, some of the most flexible capital in the market is being deployed to stabilize existing loans and prevent distress from spilling over. Over time, those restructurings could lead to recapitalizations or selective asset sales, but in the near term, they reduce the amount of dry powder available for straightforward acquisitions.
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