The Fed Cut, the Long End Didn’t Care
A first rate cut, rising 10-year yields, cooling rents, a nine-year high in CMBS delinquency, and a market where targeted single-asset deals still clear. Here are five September signals shaping how we underwrite the rest of the year.
September delivered the rate cut the consensus had been pricing in since Jackson Hole, and almost immediately delivered the lesson that single Fed decisions don’t move the long end. Underneath that, rents kept cooling, distress kept building, and the transaction market kept doing what it has done all year—rewarding investors who can underwrite specific assets in specific submarkets rather than waiting for a macro green light.
The Fed Trimmed—but Watch the Long End
On September 17 the Federal Reserve lowered the federal funds target range by 25 basis points to 4.00%–4.25%[1], its first cut of 2025. The vote was 11–1, with Governor Stephen Miran dissenting in favor of a 50 bp move. Chair Powell framed the decision as “risk management” in response to a softening labor market[2], and the dot plot now points to two additional cuts by year-end.
Long rates did not cooperate. The 10-year Treasury dipped briefly after the announcement and then climbed back above 4.12% by week-end[3], ending September around 4.14% with the 30-year up roughly seven basis points to 4.73%. Yields had already fallen roughly 25 basis points in the weeks leading into the meeting; in other words, the bond market had priced the cut weeks before it happened, and is now demanding compensation for inflation persistence and heavy Treasury issuance.
A 25 bp cut on the short end does not refinance a 4% legacy loan into a 7% takeout. The cost of capital we are underwriting today is much closer to the cost of capital we will refinance into than the consensus assumed a quarter ago.
This matters for our underwriting because the part of the curve that actually drives multifamily refinancing—the 5- and 10-year area—remained essentially unchanged through September. A business plan that requires meaningful long-rate relief to clear is still a macro bet, and we are not in the macro-betting business.
Rent Growth Cooled as Supply Pressure Built
Apartment rents continued to drift lower in August. Apartments.com (CoStar) reported the national average rent fell to $1,713, a 0.23% month-over-month decline[4]—the second consecutive monthly decrease—with annual rent growth slowing to just 1.0%. Every region posted a month-over-month drop, with the West turning negative on a year-over-year basis (−1.3%).
The regional split remained pronounced. The Midwest (+2.5% YoY) and Northeast (+2.2%) stayed the strongest-performing regions, with San Francisco (+6.2%) and Chicago (+3.9%) leading at the metro level. Austin (−4.7%) and Denver (−3.5%) continued to lag as 2021–2024 deliveries worked through the system. The cooling is concentrated—not nationwide—and it is supply-driven rather than demand-driven.
For our acquisitions strategy this means the national rent-growth print is largely useless as an underwriting input. The rent-growth assumption that gets a deal to clear should look very different in Chicago or Indianapolis than it does in Austin or Phoenix, and any model that fails to reflect that gap is mispricing risk.
Transaction Volumes Dipped, but Single-Asset Deals Held
Deal activity slowed in August, but the composition tells a more interesting story than the headline. According to MSCI Real Capital Analytics, U.S. apartment sales totaled about $12.5 billion, an 8% year-over-year decline[5]. That entire decline was driven by a 64% drop in portfolio transactions; individual-asset sales were up roughly 11%.
The RCA price index moved up 0.2% and cap rates held near 5.5%, suggesting valuations have largely stabilized at current levels. The signal we take from this is that institutional capital is still hesitant to commit to multi-asset packages, but conviction-driven buyers are absolutely closing on the right single deals. That favors disciplined sponsors who can underwrite asset by asset and execute through the bid-ask friction that is still slowing portfolio-scale activity.
CMBS Distress Hit a Nine-Year High—Bargains Remained Elusive
The distress data continued to escalate. Trepp reported the multifamily CMBS delinquency rate jumped 71 basis points in August to 6.86%[6], a nine-year high. Special servicing rates rose 24 bps to 8.61%. The overall commercial real estate delinquency rate reached 7.29%, with office still leading at over 11%.
Despite the headline numbers, industry executives continue to report that genuine “fire-sale” opportunities are scarce. Lenders are largely choosing workouts and modifications over forced dispositions[7], and Trepp data shows about $43 billion in distress was worked out in 2025 versus $32.9 billion in 2024. The path from delinquency to a clearable transaction takes longer than the headline number suggests.
Distress numbers move faster than distress transactions. Our view is that the window for real basis-driven entry points opens wider in late 2026, when extend-and-pretend genuinely runs its course.
For our acquisitions strategy this means staying disciplined on price while building relationships with the lenders, servicers, and sponsors who will ultimately have to bring assets to market. The window is widening; the volume just lags the metrics.
Regional Performance Diverged Sharply
One of the most durable themes of this cycle is the gap between supply-constrained markets and overbuilt ones. August reinforced it. The Midwest and Northeast remain the only regions with positive year-over-year rent growth, while the West and South have moved to flat or negative. At the metro level, the spread between San Francisco (+6.2%) and Austin (−4.7%) is more than 1,000 basis points—extraordinary by historical standards.
This is what a supply-driven correction looks like when the demand side is broadly healthy. Markets with limited new construction and high entry barriers are outperforming. Markets that pulled the most permits in 2021–2022 are still digesting. The implication for capital allocation is straightforward: the next twelve to twenty-four months will reward submarket-level work far more than top-down sector calls.
Closing Thought
September’s message was one of moderation and bifurcation. The Fed’s cautious easing helps at the margin, but the long end is reminding everyone that monetary policy is not the only variable. Rent growth is cooling under supply pressure that is concentrated, not universal. Distress is rising, but the actual transactions remain limited. And the regional divergence is wide enough that any “multifamily” thesis needs a metro-level addendum to be useful.
Our approach has not changed. We underwrite to today’s capital costs. We favor markets where supply is finite and demand is durable. We treat distress headlines as a leading indicator of opportunity, not as a substitute for it. And we focus on operational execution and basis discipline as the primary path to value creation.
As always, please reach out with questions or to discuss what we are seeing in our active markets.
Will Thompson
Founder & CEO, Oakdale Capital
Sources
Federal Reserve, “Federal Reserve issues FOMC statement,” September 17, 2025. federalreserve.gov
CNBC, “Fed approves quarter-point interest rate cut and sees two more coming this year,” September 17, 2025. cnbc.com
CNBC, “10-year Treasury yield hits 2-week high despite Fed rate cut this week,” September 19, 2025. cnbc.com
CoStar Group, “Apartments.com Releases Multifamily Rent Growth Report for August 2025,” September 5, 2025. costargroup.com
Multi-Housing News, “U.S. multifamily investment trends, August 2025,” September 2025 — MSCI Real Capital Analytics data. multihousingnews.com
Multifamily Dive, “Apartment CMBS delinquencies hit 9-year high, distress sales still slow,” September 2025 — Trepp data. multifamilydive.com
Bisnow, “Banks Hold $7.1B Of Seriously Delinquent Multifamily Loans,” 2025. bisnow.com
