Introduction: Why Interest Rates Still Matter in 2026

Few topics generate more confusion for multifamily owners than interest rates.

By 2026, rates are no longer moving at shock speed, but their impact on value, pricing, and buyer behavior is still very real. Many owners sense that interest rates affect their property’s value, yet struggle to understand how, why, and what to do about it.

This article explains, in plain English, how interest rates influence multifamily valuations, cap rates, and buyer underwriting, and how owners should think strategically about timing decisions in 2026.

1. The Relationship Between Interest Rates and Cap Rates

At a high level, interest rates and cap rates are connected, but not perfectly correlated.

When borrowing costs rise:

• Buyers require higher returns to justify investments
• Debt coverage becomes tighter
• Cap rates tend to expand to reflect higher risk and cost of capital

However, cap rates don’t move one‑for‑one with rates. They are also influenced by:

• Asset quality
• Location and submarket strength
• Stability of income
• Investor demand

Key takeaway: Rates set the floor for pricing expectations, but property fundamentals still drive outcomes.

2. How Buyers Underwrite Multifamily Deals in a Higher‑Rate Environment

In 2026, most buyers are underwriting with:

• Conservative rent growth assumptions
• Higher exit cap rates
• Greater scrutiny on expenses and capital needs

This means buyers are paying less for potential and more for certainty.

Properties that attract the strongest pricing today typically have:

• Clean, verifiable financials
• Stable occupancy
• Limited near‑term capital requirements

If your property relies heavily on future upside to justify value, interest rates magnify that risk in the buyer’s model.

3. Interest Rates vs. Property Performance: What Matters More?

One of the biggest misconceptions among owners is that interest rates alone determine value.

In reality, NOI is still king.

Consider this:

• A well‑performing property with strong NOI can often trade even in higher‑rate environments
• A weakly managed property will struggle regardless of rate direction

Interest rates influence how buyers price risk, but performance determines whether buyers engage at all.

4. What This Means for Owners Considering a Sale

If you’re evaluating a sale in 2026, interest rates matter, but they shouldn’t be viewed in isolation.

Owners should ask:

• How defensible is my NOI today?
• How would a buyer underwrite my expenses?
• Is my pricing expectation aligned with current debt realities?

In many cases, sellers who succeed are those who:

• Adjust strategy early
• Position the asset clearly
• Focus on execution certainty rather than peak pricing

5. Refinancing vs. Selling: Interest Rates as a Decision Input

Interest rates also impact refinancing decisions.

In 2026:

• Some owners find refinancing less attractive due to tighter proceeds
• Others use refinancing strategically to stabilize cash flow or buy time

The right move depends on:

• Loan maturity timelines
• Cash flow resilience
• Long‑term ownership goals

This is where generic advice falls short, and property‑specific analysis becomes critical.

A Quick Self‑Assessment for Owners

This discussion is especially relevant if:

• Your loan matures in the next 12–36 months
• Your property’s cash flow is tight at today’s rates
• You’re unsure how buyers would view your pricing today
• You’ve delayed decisions waiting for rates to “come down”

If any of those apply, it’s worth taking a closer look.

Summary: Interest Rates Inform Strategy, They Don’t Dictate It.

Interest rates influence the multifamily market, but they don’t eliminate opportunity.

Owners who understand how rates affect buyer behavior, underwriting, and valuation can make informed decisions, whether that means holding, refinancing, repositioning, or selling.

The most successful owners in 2026 are not waiting for perfect conditions, they are aligning strategy with reality.

For owners evaluating how interest rates impact their specific multifamily property, including value range, buyer expectations, and timing options, a customized review can provide clarity before major decisions are made.

Author: Kynan Pang, (B) CCIM

License No: RB-23513

Phone: 808-225-8776

Email: [email protected]