Apartment sales could finish the final three months of the year with a whimper thanks to economic uncertainty heading into next year.

The usual upswing in sales that occurs in the fourth quarter could be lower than the preceding third quarter for the first time in a decade if sales don’t surge in the final weeks — and they could end the year with the smallest fourth-quarter sales total since 2014, based on CoStar data for multifamily sales.

Higher lending costs, rapidly slowing rent growth, persistent inflation and expert warnings that the economy is teetering on the brink of a recession put a damper on apartment sales — and that may carry into next year.

Through Friday, apartment investment sales totaled $32 billion, according to the data. Sales have a steep hill to climb to match last year’s record fourth quarter of more than $130 billion. The next few weeks need to be busy to catch up to the $35.3 billion in 2014’s final three months.

Most “Sun Belt markets that were high on everyone's acquisitions list are now having significant oversupply conditions, because of a huge construction pipeline, hitting the top end of the market, making underwriting in those markets even more difficult,” said Jay Lybik, CoStar’s national director for multifamily analytics.

Sales in the first half of the year were higher than the same time last year. But the Federal Reserve started to rapidly raise interest rates in April.

Lybik said buyers overcame the rising rates by relying on strong rent growth assumptions. The hottest markets around the country, particularly in the Sun Belt, were still showing double-digit annual rent growth into the third quarter.

The fourth quarter started on a sour note when the yield on the 10-year Treasury, the benchmark for commercial real estate debt, rose to reach nearly 4.25% in October, the highest level since the Great Recession. The yield stayed above 4% through the first week of November.

Rent growth, meanwhile, had started to subside at a faster rate than expected. Double-digit annual growth disappeared, and markets were starting to see month-to-month declines.

Data analytics firm Zelman & Associates’ monthly sentiment survey for October showed how bad the month was for buying and selling apartments. The data for October was “probably some of the worst metric results we’ve seen” over the course of 12 years, Ivy Zelman, the firm’s CEO, said in investment firm Walker & Dunlop’s weekly webcast.

The 10-year Treasury has dropped to about a 3.5% yield, easing pressure on lending costs.

Now, where rent growth will be for the next 12 months to 18 months is what’s holding buyers back, Lybik said.

That sentiment was reflected by Kris Mikkelsen, managing director for investment sales at Walker & Dunlop, who said on the firm's webcast that the number of potential sellers is “very low right now.”

Without many buyers or sellers, there could be a dearth of apartment investment sales into next year, and "the 2023 transaction market appears poised to start very slowly and will only increase in volume if economic uncertainty clears by the summer," Lybik said.