Rising mortgage costs are reshaping U.S. housing demand and directing more households toward multifamily rentals, according to commentary from John Chang, senior vice president at Marcus & Millichap. He notes that home sales are cooling as borrowing costs climb, with apartments emerging as the primary beneficiary of this shift.
Chang observes that since the start of the Middle East conflict, the 10-year Treasury yield has increased by more than 100 basis points. Over the same period, the average 30-year mortgage rate has risen by roughly 130 basis points to the 7.3% range. That move has translated directly into diminished home-buying power for consumers.
By Chang’s analysis, the recent mortgage rate run-up has cut home purchasing power by about 8%. He illustrates the impact with a simple comparison: the monthly payment on a $425,000 median-priced home back in February is now roughly equivalent to the payment on a $390,000 home today. In other words, buyers can afford significantly less house for the same monthly outlay.
Higher borrowing costs are showing up in transaction activity as well. Pending home sales are down 8.5% from February and 11% from the same period a year earlier. Closed existing home sales have fallen about 2.2% year over year, while closed sales of new homes are down approximately 5.3%. These declines underscore how rate volatility is feeding through to residential sales volumes.
Chang also connects the slowdown in for-sale housing to broader real estate and consumption trends. Each home sale typically generates about $8,700 in retail spending on items such as appliances, furniture and renovations. As sales slow, he cautions that retail and industrial property sectors could experience a moderate drag from weaker housing-related consumption, even as multifamily sees strengthened demand.
The affordability comparison between owning and renting has moved decisively in favor of apartments. Over the past year, the median single-family home price has inched up 1.2%, but the all-in monthly homeowner payment, including principal, interest, taxes and insurance, has climbed by about 8%. In contrast, apartment rents have grown just 1.9% over the same period.
This divergence has pushed the gap between the mortgage payment on a median-priced home, assuming a 10% down payment, and the average apartment rent to $1,411 per month, which Chang describes as the widest on record. Under Freddie Mac underwriting guidelines, only 27% of U.S. households now qualify for that mortgage, sharply limiting the pool of potential first-time buyers.
Affordability pressures are also changing household life stages. The median age of a first-time homebuyer has moved from 30 years old fifteen years ago to 40 years old today. Consistent with that shift, multifamily lease renewals stand at 57.7%, close to the pandemic-era peak of 58.5%, suggesting many households are opting to remain renters longer.
Chang points out that several headwinds are still constraining apartment demand, including slower job creation, reduced household formation and a rising share of young adults living with family. Even so, the escalating cost of homeownership is helping to offset those drags by keeping more households in the rental pool.
Looking ahead, he concludes that elevated interest rates are likely to keep pressure on home sales and related retail and industrial activity, while supporting multifamily performance and investment appeal. That dynamic is emerging at a time when construction is tapering across major commercial property types, setting up a longer-term trend that he expects to unfold over the next several years.
