A Pivitol Policy Shift
On September 17th, the Federal Reserve lowered its benchmark interest rate by 25 basis points to a target range of 4 to 4.25 percent. This was the first reduction in nine months, following five consecutive meetings of holding rates steady. Policymakers also projected two additional cuts before year-end, signaling that monetary policy is shifting from a higher-for-longer stance to a gradual easing cycle.
The decision comes amid mixed economic signals. Job growth has slowed, and unemployment has edged up to its highest level since 2021. At the same time, core inflation remains at 2.9 percent, well above the Fed’s 2 percent goal, and tariff-related pricing pressures have raised concerns about whether it can continue moving lower.
Multifamily Implications
The near-term implications for multifamily are less immediate, but conditions are beginning to shift. Financing has been constrained for the past three years under elevated rates. The 10-year Treasury was trending lower before the September cut but remains high compared with historical norms. Yields climbed immediately after the Fed’s announcement, with the 10-year settling above 4.1 percent as markets weighed persistent inflation risks and the continued impact of tariffs.
While Fed rate cuts can ease short-term borrowing costs, longer-term rates are also influenced by federal deficits. Persistent government borrowing has kept the 10-year Treasury elevated, restricting the extent to which lower policy rates translate into market relief. For multifamily, this means the pace of improvement will depend not only on Fed policy but also on broader fiscal conditions.
In Baltimore and across Maryland, regional banks have already responded by loosening standards and competing more aggressively. Sellers, too, have adapted, offering short-term owner financing, typically with three-year maturities. These arrangements are designed with the expectation that refinancing will be more viable once borrowing costs move lower.
Transaction activity has slowed in recent years under the weight of elevated rates, keeping many buyers and sellers on the sidelines. Lower borrowing costs, combined with more flexible financing structures, have the potential to bring renewed momentum to the market. Limited new construction and steady renter demand provide a favorable backdrop for investment, though risks tied to federal job cuts and broader fiscal pressures remain at the front of mind.