Per a recent Morgan Stanley report, the delinquency rate for multifamily loans in commercial mortgage-backed securities jumped from 1.0% in October 2023 to 7.1% this year, the largest increase of any major property type. Green Street also reports that apartment values are more than 20% below their 2022 peak, on average. And no owner is immune: Blackstone recently defaulted on a $90 million loan on a Dallas apartment property purchased in 2021 and S2 Capital, a Dallas-based syndicator, has accumulated $400 million in loan defaults across its Sunbelt portfolio. After years of extending maturing loans, lenders are losing patience and have begun foreclosing.

As we wrote in July’s Zeitgeist column, the multifamily construction pipeline has contracted roughly 50% from its recent peak, renter demand remains strong and rents are growing; CoStar recently quadrupled its 2026 national rent growth forecast from 0.5% to 1.9%. Buyers are now acquiring high-quality properties directly from distressed owners (and to a lesser extent, lenders) at meaningful discounts to prior values and to replacement cost. For well-capitalized investors, the next 12 months may represent a very attractive opportunity to acquire distressed apartments at meaningful discounts.

Why Renters Are Staying Longer

30-year mortgage rates above 7% are making the path from renting to owning increasingly difficult. Elevated home prices and higher borrowing costs have pushed monthly payments beyond what many households can comfortably afford. For prospective buyers, the decision to keep renting is often driven by financial necessity.

The average 30-year mortgage rate reached a low of 2.65% in early 2021. At that time, buying a $500,000 home with 20% down meant a monthly principal and interest payment of $1,610. With interest rates now above 7%, the same loan costs approximately $2,660 per month – a 65% increase even without an increase in the purchase price (more on this below).

Like mortgage rates, home prices have also increased substantially. The Case-Shiller National Home Price Index rose 43% between 2021 and 2026. To put that in perspective, a $500,000 home appreciating at the national pace now costs $715,000. With 20% down and a 7% mortgage, the monthly payment would be about $3,800 – more than double the 2021 payment. Ouch. The impact is particularly evident among first-time homebuyers, who accounted for a record-low 21% of buyers in 2025, according to a National Association of Realtors survey.

The rising cost of homeownership further makes the case for apartments, strengthening overall rental demand. Many households that expected to transition from renting to homeownership are being forced to remain renters much longer – through career advances, marriage and family formation. As a result, apartment communities increasingly serve residents whose road to homeownership has become considerably longer. That makes it even more important that owners like Pathfinder work harder and smarter to satisfy residents in order to retain them longer.