What is the overall outlook for multifamily and commercial real estate? Will the market slow down? ASHLEY WILSON: • Interest rates won’t go up at every meeting ° I don’t think they will hike the interest rates at every single meeting. I think that we'll probably get two hikes and then I think we'll see softening, because even the discussion around interest rate hikes has cooled some of the multi-family madness. • Cap rate compression will continue ° Right now, the abundance of liquidity is driving the cap rate compression that we're seeing in multifamily. ° There are a couple things at play here. You have a lot of people who have just transacted and now they need to find a home to place that capital. 1031 money is also pushing the cap rate compression even further. For example, just a few weeks ago, I met with a gentleman who was in a 1031 exchange and was willing to overpay a property by up to $2 million because his tax hit would have been $3 million. That in turn impacts the pricing on multifamily. ° Q4, by the way for multifamily was the second highest transaction rate across the entire country on record and Q4 is normally a more dormant quarter for multifamily transactions. • Supply chain issues will eventually get resolved, but labor prices will go up ° I think we're going to have a role reversal. We're eventually going to have too much supply and not enough demand, because there are so many different companies trying to come up with different strategies on how to curtail the supply chain issue. I think the real issue is our labor shortage. Labor in the immediate future is going to be very expensive. • Some landlord-friendly states may become more tenant-friendly in the future ° It would not surprise me that within 10 years or less, if Texas became a tenant friendly state, as opposed to a landlord friendly state, just due to migrations.
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