MULTIFAMILY WILL STILL BE THE SUPERIOR ASSET CLASS
SLOW REAL ESTATE SALES
During tough economic times, institutional money and money from investors looking for wealth preservation tend to flow into large residential and select commercial real estate assets. This drives additional demand in these asset classes, props up cap rates, and generally insulates against the economic forces that tend to hit other less resilient asset classes – like the stock market – much harder. that mortgage interest rates have peaked (or nearly peaked), alleviating some of the risk around future debt costs. Long story short, multifamily real estate will not be immune to the negative economic forces we are likely to see, but I believe it will stand up well and continue to provide some of the best risk-adjusted returns of any traditional asset class. Additionally, with treasury bond yields stabilizing and market volatility dropping, there’s good reason to believe
Denying a loan yesterday on a multifamily purchase with 50% down made it crystal clear that my commercial mortgage banking business was going to be slow in 2023. Why? Because of high real estate prices colliding with high mortgage rates. Stir in the feds appetite to raise short term rates and end the purchase of Treasury and mortgage-backed security bonds (this has kept rates artificially low since 2008) and high rates are here to stay. Add in ongoing inflation, flat wages, flat rents, and almost a moratorium on new units being built, this is a recipe for low supply and demand in 2023. Although real estate prices will come down some, sales will be slow in 2023 due to financially solid property owners not having to fire sell and buyers who will keep waiting for prices to come down further.
THERE’S GOOD REASON TO BELIEVE THAT MORTGAGE INTEREST RATES HAVE PEAKED.
ALTHOUGH REAL ESTATE PRICES WILL COME DOWN SOME, SALES WILL BE SLOW IN 2023.
J. Scott Co-Founder of Bar Down Investments Apartment Addicts Coach Connect with J. Scott
Terry Painter Founder of Apartment Loan Store Author of The Encyclopedia of Commercial Real Estate Advice Read Terry’s Book
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