Year-End Closing Window for 2025
Federal Reserve Watch
The Fed delivered its widely expected 25bps cut, lowering the federal funds rate to 3.75%–4.00%, and announced it will end quantitative tightening on December 1.
However, the post-meeting press conference introduced a hawkish shift. Chair Powell emphasized that “the December meeting is not a foregone conclusion, far from it,” signaling internal pushback and reinforcing uncertainty ahead of year-end.
Market Impact: Treasuries rose 10–15bps across the curve following Powell’s comments.
Cut Probability: Expectations for a December cut dropped from 88%→73% after Powell’s pushback.
Data Challenge: With limited official economic data available, the Committee faces a more complicated decision process in the final meeting of the year.
Track real-time rate expectations via the CME FedWatch Tool.
Capital Source Activity
Life Companies
Life companies remain steady participants, with spreads effectively flat year-to-date.
Rates: 5.05%–6.20% for ≤65% leverage.
Spreads: 130–225bps based on asset quality, size, and leverage.
Best Execution: ≤60% leverage continues to capture pricing in the low–mid 5% range.
Banks
Banks continue to expand appetite as the yield curve normalizes and deposit stability improves.
Fixed Rates: 5.45%–6.30% for assets with strong rent collections and tenant mixes.
Floating Rates: SOFR + 180–300bps, implying 5.75%–7.00% today.
Structures: 3-, 5-, and 7-year fixed-rate programs with step-down prepayment options remain standard.
Debt Funds
Debt funds remain active and a key solution for higher-leverage executions or transitional business plans.
Leverage: 65%–75% LTC.
Spreads: 225–350bps over SOFR.
Focus: Stabilized debt yield, cash-flowing deals, and lease-up structures.
Trend: Strong uptake of preferred equity behind agency seniors, especially in multifamily.
CMBS
CMBS spreads have held relatively stable in both primary and secondary markets.
Rates: 5.75%–6.75% depending on property type, leverage, and debt yield.
Terms: 5–10 years fixed, up to 75% LTV, frequent full-term IO execution.
Agencies (Fannie Mae & Freddie Mac)
Agencies remain the most competitive capital source in the market. Freddie Mac just reduced pricing by 5bps, with expectations that Fannie may follow.
Rates: 5.00%–5.50%.
Buydowns: Effective rates as low as 4.70%–5.20%.
Volume:
Fannie Mae through September: $47.9B (vs. $32.4B last year).
Freddie Mac through September: $47.5B (vs. $35.1B last year).
Amortization: 35-year schedules still available for experienced sponsors.
Multifamily Market Update
Buyer Sentiment Strengthens
Q3 brought a noticeable improvement in buyer sentiment for both core and value-add multifamily assets. The Fed’s first rate cut of the year helped catalyze activity, narrowing bid-ask spreads and increasing competition for high-quality product.
Despite stronger sentiment, underwriting assumptions have remained disciplined. IRR targets and cap rate expectations held mostly steady in Q3—but we expect a rise in multifamily transaction volume in Q4 as buyers capitalize on a more liquid debt market and sellers regain confidence.
Key Expectations:
Incremental cap rate compression if long-term yields stabilize.
More sellers entering the market in late Q4 and into 2026.
Continued dominance of multifamily as the preferred asset class across private and institutional buyers.
Historical Cap Pricing
Cap pricing continues to track closely with Treasury movement and monetary policy expectations. Over the past two years, the charted trajectory reflects cyclicality but suggests a subtle stabilization trend emerging as rate volatility moderates.
My View
Year-end pressures are intensifying across the lending landscape. Agencies are racing toward lending caps, life companies are prioritizing clean deals, banks are steadily increasing allocations, and debt funds are stepping into gaps with structured solutions.
For borrowers, certainty of execution is paramount. Attractive pricing remains available, but speed, readiness, and strategic packaging will define successful closings heading into December.
My team and I continue to guide clients through this evolving environment with disciplined process management, lender intelligence, and tailored capital market strategy.
John Morelli and his team of expert capital advisors are dedicated to guiding you through evolving market dynamics with expert insight, deep capabilities, and tailored financing solutions. Whether you’re exploring options with banks, agencies such as Fannie Mae, Freddie Mac, and HUD, or debt funds, our team is here to help you secure the best possible terms for your commercial real estate financing.
Ready to discuss your next financing opportunity? Contact us or schedule a consultation today for expert guidance.
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