The Federal Reserve held the federal funds rate at 3.75% to 4% on Oct. 28, but the vote was 10–2, with both dissenters wanting another quarter-point hike. For landlords, the hold is not relief: the Fed's statement says inflation "remains elevated", and the commercial real estate market is bracing for a hike before year-end.
What happened
The Federal Open Market Committee left its target range unchanged six weeks after its first hike since 2023, which it approved unanimously on Sept. 16. Lisa Cook and Beth Hammack voted against the hold and preferred to raise the range by 1/4 percentage point. It was Cook's first dissent.
The statement itself reads like a central bank that is waiting, not one that is done. It says economic activity is expanding at a strong pace, job gains have kept pace with the workforce, and the unemployment rate has changed little. It also says more information will help the committee determine the policy stance that will return inflation to its 2 percent goal.
At his press conference, Chair Kevin Warsh said real activity is "clearly pointing in the right direction" but that inflation is too high. He also said more information is needed before the Fed raises rates again, and that price stability is not tied to a fixed calendar date or a single data point. Read that as "no promise either way," not as a signal that hikes are over.
The inflation backdrop is why: September CPI was up 3.7% year over year, up from 3.4% in August. In September's projections, 16 of 18 officials indicated support for one more hike in 2026. That dot plot predates this meeting, so treat it as the Fed's stated lean at the time, not current market pricing.
Why it matters for property managers
Your debt is priced off Treasuries, not the fed funds rate. Apartment debt is mostly priced off Treasuries, and one market participant said Warsh's tone may move the 10-year yield more than the decision itself. The 10-year closed at 4.992% on Oct. 27 and was still above 5% on decision day. A hold does not bring that number down on its own.
Mortgage rates stay high, which tends to keep renters renting. The 30-year fixed contract rate in the Mortgage Bankers Association survey was 7.37% for the week ending Oct. 23, down from 7.41%. Purchase applications were 18% lower than a year ago on an unadjusted basis. Fewer would-be buyers leaving means steadier retention for many portfolios, but it also means residents comparing your renewal against other rentals, not against a mortgage.
Valuations and refinancing are still resetting. One lender described a "valuation reset" in loan-to-value metrics as Treasury yields rose, along with higher interest-rate cap costs. Another investor said cap rates have moved out since the September meeting but sellers are slow to accept it; until they do, he said, many deals stall, get retraded or die, and he expects volume to stay thin through year-end. If you own, that affects refinance proceeds. If you manage for owners, expect harder questions about NOI and expenses in 2027 budgets.
Not every market is in the same spot. One economist said Sun Belt multifamily faces oversupply while some industrial is "robust." Rate pressure hits hardest where concessions are already doing the work rents cannot.
What to do this week
- Stress-test any floating-rate or 2027-maturing debt. Run your debt service coverage at today's rate and at a quarter-point higher. The two dissents for a 1/4-point hike make that a reasonable test case, not a worst case. Talk to your lender or broker now if a cap or extension decision is coming.
- Price renewals for retention, not for the Fed. With purchase demand 18% below a year ago, fewer residents are leaving to buy. Use that to hold occupancy with modest, defensible increases rather than pushing hard on residents who have local rental options.
- Budget 2027 interest and insurance as if relief comes late. One CBRE researcher expects greater clarity on rates in early 2027, and a Bainbridge development executive does not expect material rate drops in the near term. Build the base case on current rates and treat any decline as upside.
- Hold off on rate-sensitive capital decisions you can delay. If a big renovation depends on a refinance or new loan, get updated quotes before you commit. Lenders are re-underwriting values, so last quarter's term sheet may not hold.
- Write the owner memo now. Explain in plain numbers why the hold doesn't lower borrowing costs, what the 10-year is doing, and what your renewal and budget assumptions are. Owners will ask after the December meeting either way.
What we're watching
- The December FOMC meeting. The commercial real estate market is bracing for a hike before year-end, but it is not decided. Warsh tied the next move to incoming data, so October and November inflation reports matter more than usual.
- The 10-year Treasury around 5%. It drives apartment loan pricing more than the Fed's target range. A sustained move in either direction changes refinance math faster than any Fed vote.
- Energy prices. Warsh said energy and related prices have risen again in recent weeks. That feeds into resident budgets and building operating costs alike.
- Transaction volume. If buyers and sellers stay apart on price through year-end, fewer sales will set comparables. That makes appraisals and refinance proceeds harder to predict into 2027.
This is general information, not financial advice. Confirm loan terms and hedging decisions with your lender and financial advisors.