Multifamily investors sour on the second half but plan to keep buying

Six months ago, multifamily investors expected volatility to fade and transactions to accelerate. A Berkadia survey of more than 100 principals and executives, first reported by Commercial Observer, found the mood has soured. Sixty-one percent described their outlook for the second half of 2026 as negative.

The pessimism tracks performance. Fifty-two percent of respondents said multifamily did worse in the first half than they had anticipated. Josh Bodin, Berkadia's senior vice president of capital markets strategy and trading, told Commercial Observer that optimism has given way to an operating environment that remains uncertain: interest rate volatility persists, and property performance is softer than expected.

The 10-year Treasury now yields 4.7 percent, its highest since 2023. The 30-year sits at 5.2 percent, a 20-year high. Those yields pull capital toward bonds, keep mortgage costs high, and put constant pressure on underwriting.

Sales data already show the hesitation. CBRE recorded $29.5 billion in first-quarter multifamily investment sales, down 6 percent year over year. Second-quarter volume rebounded to $34.9 billion. It still trailed the prior-year quarter by 2.7 percent. The bounce is real, but it is a bounce off a softened floor.

Underwriting has tightened to match the moment. Nearly half of survey respondents are underwriting exit cap rates 25 to 50 basis points wider than today's levels. Nearly three-quarters assume rent growth will not exceed 2.5 percent through late 2027. Bodin says investors are reviewing rent growth assumptions, exit caps, financing structures, and business plans more closely than they did earlier in the year. Those inputs move deals only when sellers concede price.

The same investors who are negative on the next two quarters are not leaving the asset class. Eighty-two percent plan to expand their portfolios in the coming months. Eighty-three percent expect market conditions to improve by late 2027. The gap between those two figures is the size of the patience being demanded. Bodin puts it plainly: investors are bullish on multifamily, cautious on individual deals. Capital is rotating toward core and core-plus credit and debt strategies, and away from value-add and opportunistic deals.

The negative six-month outlook says more about price than conviction. Investors have not abandoned apartments; they have stopped accepting the assumptions built into current listings. Bodin says they want stronger fundamentals, more realistic pricing, and more downside protection before deploying capital. For sellers, that means the bid-ask spread will not close until the numbers move.

Supply is the counterweight. Bodin notes that supply deliveries are beginning to moderate in many markets, and capital remains available for well-positioned assets. The 83 percent expecting improvement by late 2027 are betting the rate shock works through, new construction tapers, and today's conservative underwriting becomes the baseline for the next cycle. The buyers writing wider caps and slower rents are making that bet now.