AllStreet Capital · Macro & Rates
Rate Path & SFR Cap Rates
The forward curve, financing costs, and what a reset in cap rates means for entry discipline
Snapshot as of June 30, 2026 · sources: Federal Reserve (FOMC), CME FedWatch, Freddie Mac PMMS, U.S. Treasury, John Burns, CRE Daily · ask to refresh and this view updates
Rates have plateaued, not plunged. The Fed has held at 3.50–3.75% for four straight meetings, and its own dot plot implies only ~two more 25bp cuts through end-2027. Meanwhile SFR cap rates reset ~194bps higher to 7.3% — and the gap to ~6.5% financing has restored thin but positive leverage for the first time in years. In this regime, entry basis is the edge, not a bet on falling rates.
The forward path · FOMC dot plot & futures imply a shallow glide (Fed / CME FedWatch)
Now · Fed funds 3.50–3.75% · held 4 meetings (12–0)
End-2026 · 3.25–3.50%
Dot plot implies one more 25bp cut this year
End-2027 · 3.00–3.25%
One further cut, then holding — no return to the zero-rate era
Next meeting · 70% odds of a hold
CME FedWatch as of Jun 29, 2026 · inflation still above the 2% goal
Current policy rate
Projected path
Near-term odds
The message for underwriting: don't underwrite to rate relief you can't control. Model to a rate that drifts down slowly and could stall — the base case the market is actually pricing.
The rate stack today
3.63%Fed funds (midpoint)
4.37%10-yr Treasury
6.49%30-yr mortgage
30-yr mortgage vs a year ago6.49% ↓ from 6.77%
10-yr Treasury (Jun 30, 2026)~4.37%
Policy stanceRestrictive, easing slowly
Cap rate vs the cost of money · the spread that matters
Cap rate over financing (positive leverage)~+80 bps restored
Cap rate over 10-yr (risk premium)~+293 bps
For the first time in years, average SFR cap rates sit above agency financing costs — leverage is accretive again, if the asset is bought right.
The cap rate reset · yields rebuilt from the 2021 lows (John Burns / CRE Daily)
SFR cap rate (Q4'25)7.3%
Move since 2021+194 bps
Investment volumes~In line w/ historical avg
National SFR rent growth (Jan'26 YoY)+2.6%
OccupanciesNear long-run average
Property-level cash flowHealthy
Higher cap rates came from slower home-price growth and normalizing rents — not distress. That's a healthier entry setup: more yield, stable fundamentals, disciplined competition.
Read-through for capital deployment
- Buy on yield, not on a cut. The curve is shallow — returns have to come from basis and operations, not rate compression.
- Positive leverage is back. ~7.3% in vs ~6.5% debt is accretive — but the ~80bp cushion is thin, so entry price is everything.
- Lock or protect financing. With cuts slow and uncertain, term and rate certainty are worth paying for.
- Rate relief is optionality, not the thesis. If cuts come faster, it's upside — don't need it to underwrite.
What we're watching
- Inflation prints vs the 2% goal — the gating factor on the cut path.
- 10-yr Treasury — the real driver of mortgage and cap-rate pricing, more than the funds rate.
- Whether SFR cap rates hold at 7%+ or compress as capital returns.
- Agency/DSCR spread moves that widen or narrow the positive-leverage gap.
The dials that decide the thesis
3.50–3.75%
Fed funds (held 4 mtgs)
A stable-to-lower funds rate + a 10-yr that stays anchored + cap rates holding above debt = accretive, underwritable deals. A 10-yr back-up or a cap-rate compression would squeeze the spread — the levels to watch.
