Investors have spent $63 billion on apartment buildings from 2019 to 2021, the highest figure on record. Prices paid for apartment buildings increased 22.4% from the first quarter of last year to the first quarter of this year. But with this, interest rates have quickly risen this year as well. This caused some multifamily return rates to fall a percentage point or more below the interest rate on their mortgages, thus creating negative leverage.

Outstanding mortgage debt backed by multifamily buildings has more than doubled to $1.8 trillion since the financial crisis. Mortgage rates have risen to 4.5% on some multifamily deals which may cause apartment owners to be under pressure. Rising rental growth is inevitable but the question is if it will outpace the interest rates.