Apartments could be the next real estate sector to struggle

By Joe Rennison and Julie Creswell | The New York Times

It might seem like a great time to own apartment buildings.

For many landlords, it is. Rents have soared in recent years because of housing shortages across much of the country and a bout of severe inflation.

But a growing number of rental properties, especially in the South and the Southwest, are in financial distress. Only some have stopped making payments on their mortgages, but analysts worry that as many as 20 percent of all loans on apartment properties could be at risk of default.

Although rents surged during the pandemic, the rise has stalled in recent months. In many parts of the country, rents are starting to fall. Interest rates, ratcheted higher by the Federal Reserve to combat inflation, have made mortgages much more expensive for building owners. And while homes remain scarce in many places, developers may have built too many higher-end apartments in cities that are no longer attracting as many renters as they were in 2021 and 2022, like Houston and Tampa, Fla.

These problems haven’t yet turned into a crisis, because most owners of apartment buildings, known in the real estate industry as multifamily properties, haven’t fallen behind on loan payments.


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