October 30th, 2025

Economic Overview 

Equity markets ended last week higher as investors balanced shifting headlines on U.S.–China trade policy, an encouraging inflation print, and optimism that tariff tensions could ease in the near term. Early in the week, geopolitical developments dominated market sentiment. Reports suggested that trade negotiations with China remained on course, though the U.S. was also weighing new export controls and potential sanctions against Russia’s two largest energy producers.

The 10-year Treasury yield briefly fell to 3.95% midweek, supported by a well-received Treasury auction and softer risk appetite tied to trade uncertainty. Yields later rebounded as oil prices climbed following reports of possible sanctions, with the benchmark yield returning to around 4.00% heading into the weekend. (Currently 4.1%)

Friday’s macroeconomic data helped lift investor confidence. The delayed September CPI report showed core inflation at 3.0% year-over-year, down from 3.1% previously and below market expectations—bringing price growth a bit closer to the Federal Reserve’s 2% target.

By week’s end, the 2-year Treasury yield ticked up 2 basis points to 3.48%, while the 10-year ended 1 basis point lower at 4.00%, leaving the curve marginally flatter.

Federal Reserve Cuts Rates Again as Economic Uncertainty Lingers

The Federal Reserve lowered its benchmark interest rate by 25 basis points, its second reduction of the year, setting the federal funds target range at 3.75% to 4.00%—the lowest level in three years. Policymakers cited persistent uncertainty about the economic outlook, noting that limited data from the ongoing government shutdown, now approaching a month, has complicated the decision-making process. The last time the rate stood at this range was November 2022.

Fed Faces Divisions Amid Limited Data

Chair Jerome Powell acknowledged significant debate within the Committee regarding future actions. “A further reduction in December is far from certain,” Powell said during Wednesday’s press conference, emphasizing that policymakers are operating with limited visibility. “If you’re driving in the fog, you slow down,” he added, suggesting a more cautious pace ahead.

With inflation easing toward the 2% target, attention has shifted toward the labor market, which is showing signs of strain. The unemployment rate rose to 4.3% in August, up from 3.4% in spring 2023, while layoffs surged 66% year-over-year, the highest since 2020, according to data from Challenger, Gray & Christmas.

Fed officials voted 10-2 in favor of October’s rate cut, but differences in approach remain. Stephen Miran dissented in favor of a larger half-point reduction, while Kansas City Fed President Jeffrey Schmid preferred no change. Policymakers’ median projections still indicate one more cut before year-end and another in 2026.

Fed to Halt Balance Sheet Reduction

The Fed also announced it will pause the runoff of its $6.6 trillion balance sheet starting December 1, citing signs of tightening liquidity and falling bank reserves. This move aims to prevent unnecessary strain on credit markets.

Powell clarified that the central bank does not plan to resume buying mortgage-backed securities (MBS) as it did during the pandemic. These securities—bundled packages of home loans sold to investors—helped keep mortgage rates low during periods of quantitative easing.

Although the Fed remains focused on reducing its $6 trillion in holdings, including about $2 trillion in MBS, Vice Chair Michelle Bowman reiterated that the goal is to minimize the Fed’s footprint in money and Treasury markets.

Bank of Canada Follows Suit

The Bank of Canada mirrored the Fed’s move, cutting its overnight rate by 25 basis points to 2.25%, its second reduction in less than two months, amid softening economic conditions and inflation near 2%. Canadian real estate professionals expect the cut to further stimulate deal activity.

Data Center Construction Unaffected

Powell noted that the Fed’s rate policy is unlikely to meaningfully affect data center construction, which tends to follow long-term strategic investment trends rather than short-term borrowing costs. “Spending on data centers is not especially interest-sensitive,” he said, citing heavy activity in Northern Virginia and other tech hubs.

Meanwhile, labor demand continues to ease. Amazon announced plans to eliminate 14,000 jobs, highlighting a growing trend among large employers to streamline operations and increase reliance on AI technologies.

Data Scarcity Complicates Fed Policy

In its official statement, the Fed said that “economic activity has been expanding at a moderate pace.” However, the lack of new government data during the shutdown has limited insight into labor trends, inflation dynamics, and consumer health.

At the same time, trade tensions and potential new tariffs on China and Canada could reintroduce inflationary pressure, complicating efforts to ease policy. Powell warned that “some price increases” are likely and that “there’s no risk-free policy path.”

Housing Market: 

Mortgage rates have begun to retreat but remain above 6%, with Freddie Mac reporting an average rate of 6.19%, the lowest in over a year. The decline reflects expectations for further easing but may not be sustained.

While the Fed’s policy rate influences short-term lending, mortgage rates track longer-term benchmarks such as the 10-year Treasury yield, which rose 7 basis points to 4.05% following the Fed’s announcement—signaling lingering uncertainty about the path ahead.

Home prices also continue to challenge buyers. According to the Federal Reserve Bank of St. Louis, the median U.S. single-family home price nearly doubled in 15 years—from $208,400 in 2009 to $410,800 in the second quarter of 2025.

Potential Changes in Fed Leadership

Looking ahead, shifts within the Fed’s leadership could influence monetary policy. Chair Jerome Powell’s four-year term ends in May, though he can remain on the Board until 2028.

Stephen Miran, confirmed in September, will serve until January 2026, but his seat is expected to be filled by President Trump’s next nominee once Powell’s term expires.

Separately, Governor Lisa Cook faces an ongoing legal challenge over her position. A Supreme Court hearing in January will determine whether she can remain on the Board, a decision that could alter the Fed’s internal voting balance.

The Trump administration is reportedly evaluating five potential successors for Fed Chair: Christopher Waller, Michelle Bowman, Kevin Warsh, Kevin Hassett, and Rick Rieder. A final decision could come as soon as December.

U.S. Apartment Market Overview – Q3 2025

The multifamily sector continued to dominate U.S. commercial real estate through the third quarter, maintaining its position as the largest asset class. Total investment activity reached $43.8 billion, roughly 1.5 times higher than the industrial sector, the next largest category. The recent decline in interest rates has strengthened underwriting conditions, enabling more apartment transactions to close successfully.

Investment volume in Q3 was 13% higher year-over-year, roughly in line with the average third-quarter activity seen from 2015 to 2019. Notably, this growth occurred without the boost of any major portfolio or entity-level transactions. Instead, the quarter was defined by single-asset trades, which accounted for nearly $37 billion, or about 85% of total volume.

Portfolio transactions, by contrast, slowed as investors emphasized individual property performance rather than bulk acquisition efficiencies. These deals totaled $6.8 billion, representing a 19% decline from a year earlier, while entity-level activity was virtually absent.

Distressed sales gained modest traction, rising a little over 20% year-over-year. While apartments represented less than one-fourth of all distressed asset dispositions, they included three of the five largest such deals by dollar volume. The most notable was the sale of Park Kiely in San Jose, a 948-unit property sold by Greystar and Goldman Sachs for $370 million.

Geographically, major metro areas led the national rebound in multifamily investment. Sales in the six largest metros climbed 38% from a year earlier, compared with just 4% growth in non-major markets, where fewer portfolio transactions limited momentum.

Pricing and Cap Rate Trends

Cap rate movement stabilized in 2025, signaling the end of the rapid repricing period that followed the 2022 rate hikes. According to the RCA Hedonic Series, apartment cap rates were essentially unchanged year-over-year in Q3, holding steady near 5.7% for seven consecutive quarters.

Garden assets averaged 5.8%, unchanged from last year.

Mid/high-rise properties remained around 5.5%, a level consistent for the past eight quarters.

Compared to early 2022, garden cap rates are roughly 120 basis points higher, and mid/high-rise cap rates about 110 bps higher, reflecting the lasting impact of rate normalization.

Interestingly, apartment yields remained below average corporate bond yields (6.0% in Q3), indicating that investors were willing to accept a smaller risk premium due to improving rent fundamentals and slowing construction pipelines.

On the transaction side, mid/high-rise properties saw a 16% increase in activity, slightly outpacing garden properties at 10% growth. Both subtypes experienced particularly strong gains in single-asset transactions, with 21% and 22% respective increases in year-over-year sales.

 Market Rankings – Top 25 Apartment Investment Markets

Dallas maintained its longstanding dominance, ranking #1 for apartment investment for the ninth consecutive year. The metro recorded $6.7 billion in transaction volume across 148 deals, more than 60% above the average count for top markets.

Seattle surged to #2, climbing eight spots from 2024 and posting its strongest position on record. Roughly one-third of its total came from portfolio deals, though even on single-asset sales alone, Seattle would still rank sixth. It was also the only top-five market to exceed its pre-pandemic (2015–2019) investment average.

Manhattan rose to #4, marking its highest standing since 2016. A key driver was Naftali Group’s $810 million acquisition of 800 Fifth Avenue, the largest single-asset multifamily sale of the year. However, since the buyer intends to redevelop the site into condominiums, the purchase does not necessarily reflect renewed confidence in the city’s rental market.

San Jose ranked #13, achieving its strongest investment volume on record with $2.1 billion in sales, more than double its pre-pandemic average. The $370 million sale of Park Kiely, a distressed property refinanced at $415 million in 2018, accounted for over 15% of all multifamily investment in the market.