Multifamily investors face mounting challenges as short-term loans and inflation squeeze cash flow and refinancing options disappear.
Foreclosures are making headlines again—but not in the way you might expect. While multifamily buildings are seeing a sharp rise in distress, single-family homes, especially in California, are holding steady. Today, we’ll go over what’s driving the divide and what you need to know if you own or plan to buy real estate in today’s market.
In 2008, California saw over 236,000 homes go into foreclosure. Today, that number is below 30,000. The difference lies in how homeowners have structured their loans. Most single-family homeowners locked in low fixed-rate mortgages when rates were at historic lows, and that has insulated them from today’s rate spikes.
Fixed-rate mortgages. Fixed-rate mortgages provide stability by keeping monthly payments predictable, even as interest rates rise. This protection has allowed many homeowners to avoid the refinancing challenges now hitting investors with variable-rate loans.
“Trade tensions and bond market shifts are keeping mortgage rates higher for longer.”
Variable financing. Many multifamily property owners relied on short-term or floating-rate loans, unlike most single-family homeowners. As interest rates have climbed, refinancing has become increasingly complex, leaving many owners with few options. As a result, more than 12% of multifamily loans are now in distress, the highest level in over a decade.
Rising operational costs. Operating costs for multifamily owners have increased significantly, adding to the problem. Insurance premiums, taxes, and maintenance expenses are all up, cutting deep into cash flow. And with rent growth slowing, many landlords are being squeezed from both sides.
Bond market and Fed outlook. Economic uncertainty is adding more pressure. Recent trade tensions and a major selloff in U.S. Treasuries have caused mortgage rates to rise. That reduces buying power and investor returns, putting downward pressure on property values. If the Federal Reserve steps in, rates could drop quickly, helping to stabilize the market, but that depends on how the broader economy performs in the coming months.
If you’re feeling uncertain about how these shifts impact your home or investment property, now is the time to act. Early planning can give you more control and better options. Whether you’re refinancing, buying, or looking to protect your equity, we’re here to help guide you through it. Call us today at (123) 455 7899 or email paul@KnowledgeRE.com ** ** to talk about your next move. We look forward to hearing from you!
