The Fed Held Rates After a Hike. Bay Area Multifamily Refinancing Just Got Harder
The Federal Reserve held its benchmark rate at 3.75% to 4.00% on October 28, 2026, extending a pause that followed a quarter-point increase in September, the first Fed rate hike since 2023. Two of the Fed's own policymakers wanted to raise rates again rather than hold. For owners of multifamily property in the South Bay, the Peninsula and Alameda County, the practical takeaway is that borrowing costs are not falling the way many assumed a year ago, and owners with loans from the ultra-low-rate 2021-2022 period are the ones who will feel that gap first as their loans come due.
Key takeaways
- The Fed held its target rate at 3.75%-4.00% on October 28, 2026, after raising it a quarter point in September, the first increase since 2023.
- Two FOMC members, Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack, dissented in favor of another hike rather than a cut or a hold.
- Agency apartment loan rates (Freddie Mac around 5.21%, Fannie Mae around 5.34%, per CRED iQ's October analysis) now sit well above the roughly 3.35% median coupon on 2021-2022 vintage apartment loans nationally.
- South Bay, Peninsula and Alameda County rents kept climbing through the second quarter of 2026 even as vacancy tightened in most submarkets, which partly offsets higher borrowing costs for owners who refinance.
- A national CRED iQ analysis found that loans holding 31% of a sample of maturing Fannie Mae, Freddie Mac and CMBS apartment debt now need added equity to refinance at current coverage requirements, a share that grew after September's rate move.
What the Fed actually did on October 28
The Federal Open Market Committee voted 10-2 to maintain the federal funds rate at 3.75% to 4.00%. The two dissents did not come from officials who wanted easier money. Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack both preferred to raise the target range by a quarter point at this meeting, according to the Fed's own statement.
The committee's language described economic activity as "expanding at a strong pace," an upgrade from its prior characterization, while noting that "inflation remains elevated." The statement removed earlier language suggesting the September hike alone would support a timely return to the Fed's 2% inflation goal. Separately, the Fed maintained the interest rate paid on reserve balances at 3.90%, effective October 29.
None of this is a signal that borrowing costs are about to come down. It is the second straight meeting in which the Fed has leaned firmer rather than softer, and traders have priced in elevated odds of another increase at the December meeting, according to CME FedWatch data reported in financial media following the decision. That figure moves with each new economic release, so treat it as a snapshot rather than a forecast.
Why a hold after a hike changes the refinancing math
A cap rate, the ratio of a property's net operating income to its purchase price, moves opposite to how buyers feel about financing costs: when borrowing gets more expensive, buyers generally need a higher cap rate to make the math work, which puts downward pressure on what they'll pay. That dynamic is now colliding with a second one: a wave of apartment loans originated during 2021 and 2022, when agency and bank debt commonly carried coupons near 3.35%, are reaching their maturity dates into an environment where that same debt now prices closer to 5.2% to 5.3%.
CRED iQ, a commercial real estate data firm, sized $136 billion of Fannie Mae, Freddie Mac and CMBS apartment debt maturing between October 2026 and December 2028 at today's rates. It found that loans representing 23% of that pool, or 31% of the outstanding balance, would need new equity to refinance under a standard 1.25x debt coverage threshold, meaning the property's income needs to cover its debt payments by at least that margin. Before September's rate move, the comparable share was 28% of balance; the increase alone added an estimated $846 million to the national refinancing gap. CRED iQ is explicit that this is a national dataset covering multiple metro areas, not a Bay Area-specific figure, and that most maturing loans can still refinance without added equity. It is useful context for the pressure building in the system, not a number to apply directly to a specific South Bay, Peninsula or Alameda County property.
For an owner whose loan originated in 2021 or 2022 and comes due in the next year or two, the question is less about whether the Fed cuts rates soon and more about what the replacement loan's coverage requirement does to the amount that lender will actually fund.
How South Bay, Peninsula and Alameda County owners are positioned differently
The three regions are not facing this financing environment from the same starting point. Fundamentals, rent growth and vacancy varied meaningfully across them through the second quarter of 2026, according to CBRE's Bay Area multifamily research.
South Bay (Santa Clara County)
Silicon Valley's apartment vacancy rate stood at 2.6% in the second quarter, down 60 basis points (a basis point is one-hundredth of a percentage point) from the prior quarter and down 80 basis points year over year. The average rent per unit reached $3,516, up from $3,364 the prior quarter and up 6.4% year over year. Within the submarket, Mountain View/Palo Alto/Los Altos and South Sunnyvale/Cupertino posted the tightest vacancy, at 2.5% and 2.2% respectively.
Transaction volume reached $1.0 billion through the first half of 2026. Recent sales tracked by CBRE include The Fay in San Jose (336 units, built 2024, sold for $175 million, or roughly $521,000 per unit) and Almaden Terrace Apartments in San Jose (262 units, built 1972, sold for about $87.7 million, or roughly $335,000 per unit), illustrating the spread in per-unit pricing between newer and older product in the same submarket. Separately, Yardi Matrix data reported in Multi-Housing News put San Jose metro unemployment at 3.7% in April 2026, with the metro adding 17,400 net jobs over the prior twelve months, a labor-market backdrop that has helped support rent growth even as new supply has slowed.
Peninsula (San Mateo County)
San Mateo County's three submarkets each tightened further in the second quarter. Central San Mateo County held vacancy at 2.3%, flat quarter over quarter but down 40 basis points year over year, with rent rising to $3,809 from $3,626 the prior quarter, up 8.2% year over year. South San Mateo County posted the lowest vacancy of the three at 2.3%, down 130 basis points quarter over quarter, with rent at $4,239. North San Mateo County, the county's more affordable submarket, saw rent of $3,206, up 5.6% year over year.
Recent transactions include Leahy Square in Redwood City (110 units, built 1973, sold for $73.9 million, or about $672,000 per unit) and Azara in San Mateo (74 units, built 2021, sold for $54.75 million, or roughly $740,000 per unit), both closing in the second quarter of 2026.
Alameda County
Vacancy across Alameda County's submarkets ran wider than the South Bay or Peninsula, which is typical for the market and reflects a different unit mix and price point. Oakland/Berkeley posted 4.0% vacancy, down 70 basis points quarter over quarter and down a notable 180 basis points year over year, with rent at $2,950. Fremont held the tightest vacancy in the county at 2.6%, with rent of $2,944, up 4.5% year over year. Hayward/San Leandro/Union City and Livermore/Pleasanton both ran closer to 4.0% vacancy, with rents of $2,524 and $2,874 respectively.
Recent sales in Livermore illustrate the value-add end of the county's market: Briarwood Apartments (64 units, built 1961, sold for $19.66 million, or about $307,000 per unit) and Outrigger Apartments (42 units, built 1964, sold for $11.6 million, or roughly $277,000 per unit).
What this means for owners with loans maturing in 2026 and 2027
If you own a multifamily property anywhere in these three regions and your loan matures in the next 18 to 24 months, three things are worth doing now rather than waiting for a Fed cut that may not arrive on your timeline.
First, run the refinance math today, not at maturity. Pull your current coupon, your property's trailing twelve-month net operating income and your lender's minimum debt coverage ratio, then size what a loan at today's agency or bank rates would actually support. If the number falls short of your existing balance, you will want to know that well before the maturity date, not in the final weeks.
Second, weigh your options beyond a straight refinance. Some owners in this position are using a partial paydown from retained cash flow or a cash-out alternative from a different asset to bridge the gap. Others are evaluating whether a sale, potentially structured as a 1031 exchange into a different Bay Area asset, makes more sense than refinancing into a smaller loan at a materially higher rate. Each path has different tax and timing consequences.
Third, rate-lock decisions deserve real attention given the Fed's current posture. With the committee leaning toward another possible increase rather than a cut, an owner who can lock a rate ahead of the December meeting may be better positioned than one who waits for a decline that current Fed language does not point toward.
This post is for general information and does not constitute legal, tax or financial advice. Talk with your lender, attorney or CPA about how current rates and coverage requirements apply to your specific property and loan.
Frequently asked questions
Did the Federal Reserve raise or cut interest rates in October 2026?
Neither. The Fed held its benchmark federal funds rate at 3.75% to 4.00% on October 28, 2026, by a 10-2 vote. This followed a quarter-point increase in September, which was the Fed's first rate hike since 2023. Two FOMC members, Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack, dissented in favor of raising rates again rather than holding.
How does the Fed's rate decision affect Bay Area apartment loan rates?
The Fed's target rate is not the same as a commercial mortgage rate, but it anchors the broader rate environment that agency and bank lenders price from. As of mid-October 2026, Freddie Mac apartment loans were pricing around 5.21% and Fannie Mae loans around 5.34%, according to CRED iQ, well above the roughly 3.35% median coupon on apartment loans originated in 2021 and 2022.
Are South Bay, Peninsula and Alameda County multifamily rents still rising despite higher financing costs?
Yes, through the second quarter of 2026. CBRE data show year-over-year rent growth in every submarket across the three regions, ranging from roughly 1.4% in Hayward/San Leandro/Union City to more than 8% in parts of San Mateo County and the South Bay's Mountain View/Palo Alto/Los Altos submarket, with vacancy tightening in most areas at the same time.
What should an owner with a loan maturing in 2027 do now?
Run the refinance numbers against current agency and bank rates well before the maturity date, using your trailing twelve-month net operating income and your lender's minimum debt coverage ratio. If the supportable loan amount falls short of the existing balance, start evaluating a partial paydown, a sale, or a 1031 exchange early, since each option takes time to execute properly.
Will the Fed raise rates again in December 2026?
The Fed has not committed to a December move. Its October statement says only that "the accumulation of more information will help the Committee determine the policy stance appropriate" going forward. Futures markets have priced in elevated odds of another increase, but that is a market expectation, not a Fed commitment, and it can shift with each new economic report.
Sources
- Federal Reserve, FOMC statement, October 28, 2026
- Federal Reserve, Implementation Note, October 28, 2026
- CRE Daily, "Multifamily Refinance Gap Hits $6.8B After September Hike," October 16, 2026
- CBRE Research, Q2 2026 Bay Area Multifamily Figures
- Multi-Housing News, "San Jose Multifamily Report – July 2026" (Yardi Matrix data)
