Sales of U.S. multifamily assets essentially collapsed during the third quarter of 2022, according to the National Multifamily Housing Council Quarterly Survey of Apartment Market Conditions.

NMHC Chief Economist Mark Obrinsky cited the higher cost of debt and equity, along with generalized economic uncertainty, as the drivers of the slowdown. The survey also reported higher vacancies and slower rent growth compared with the second quarter.

“This has caused the market for apartment transactions to come to a virtual standstill, as buyers seek a higher rate of return that sellers are unwilling to accommodate via lower prices,” Obrinsky said in a statement.

Multifamily sales transactions fell 17% in the third quarter nationally, according to MSCI data, though they are still up 25% year-to-date over 2021, reflecting a robust first half of the year for sales.

“We are one of those that are sitting on the sidelines because [of] pricing and the cap rates," Integral Group President Vicki Lundy Wilbon said during Bisnow's Southeast multifamily annual conference in Atlanta in October.

The cost of money will soon be even higher, with the Federal Reserve poised to announce its latest rate hike on Wednesday, probably another 0.75 percentage points. So far the central bank has already upped its benchmark short-term rate 3 percentage points since March.

NMHC conducted its survey from Oct. 17 to Oct. 24, with 268 CEOs and other senior executives of apartment specialists nationwide responding.

The survey is the basis of four indexes produced quarterly by NMHC, including market tightness, sales volume, equity financing and debt financing, each on a scale of 0 to 100, with results below 50 indicating a lower level of transactions than before.

The latest sales volume index came in at 6, with sales volume declining for the fourth consecutive quarter. Eighty-nine percent said they were experiencing lower sales volume compared with Q2, while only 1% reported sales volume higher than the previous quarter.

The sales volume index is at its lowest point since the first weeks of the pandemic in 2020, and it has only fallen this low two other times since the survey began in 1999.

The equity financing index came in at 12, while the debt financing index came in at 5. Only 3% of respondents reported conditions to be unchanged for debt financing, and no one said  that conditions have improved over the last three months.

The market tightness index came in at 20, the highest of the four. Sixty-six percent of respondents reported markets to be looser than during the second quarter, while 29% believed conditions were unchanged.