April 2022 Edition - Today’s Investment Outlook

The good news is that investor demand remains strong despite headwinds of concern.  Investor sentiment has fully recovered from the pandemic and reached its highest level since 2015.  The apartment market is seeing continued high growth, but several factors have many owners asking, “Should I stay or should I go?”

Here are some of today’s major concerns that effect your investment decisions:  Inflation, stagflation, rising interest rates, cap compression, inventory shortages, Russia vs. Ukraine conflict, energy dependence versus independence, Communist China, the 2022 mid-term elections, the 2024 Presidential election, new government regulations, ESG requirements, modern monetary theory, The Great Reset, climate change, our southern border and immigration control, tokenized investment, the pandemic, rising construction materials cost, supply chain disruptions.  I’m sure you can add more to the list.  My point is, we have many concerns that effect our economy and our industry.  Real Estate investing is long-term, non-liquid investing.  We need to stay informed on what is happening in the world and make immediate adjustments as needed to stay ahead of these concerns.

At this point in time, we are on solid footing and the future looks very promising.  Coming off of a record setting 2021 in multifamily investing, we are seeing continued extremely high rent growth.  Sellers are looking to take advantage of legitimate pro-forma rents that buyers are once again underwriting.  Rent increases have hit a 35-year high as inflation and global conflict have hit home.  High demand for housing and a short supply is pushing prices up.  There’s currently low housing inventory, with pandemic-related supply chain holdups and price increases for building materials adding to cost of development.  Additionally, pent-up demand from pandemic-postponed sales magnifies momentum.  The expectation for 2022 is elevated transaction activity.

However, reduced buyer interest and tighter lending standards could lead to reduced price appreciation as the year progresses.  The Fed is expected to increase interest rates by a total of 175 basis points this year.  “This could reduce the buyer pool and activity by over 50%.  For those selling, or considering selling, now is the time to act and get ahead of reduced buyer interest and potential decreases in price appreciation.  For those buying, or considering buying, act quickly to lock in low rates, while agency loans are still free-flowing and qualifying is still relatively easy.  For those owners whose mortgages are maturing in the next two years, now is the time to seriously consider refinancing, with low rates and easy qualifying.” (Fin Erwin, Marcus & Millichap).

Last week I attended the inaugural InterFace Carolinas Multifamily Conference held in Charlotte, North Carolina.  The InterFace Conference Group, a division of France Media, Inc., presented the conference which was well attended. by 271 representatives from 238 companies involved in the various aspects of the multifamily business in the Carolinas.  The conference included six separate panel discussions titled, “Will the Madness Continue? The Outlook for Transaction Velocity, CAP Rates and Dealmaking in the Investment Market”, “Everything You Need to Know About the Single-Family Rental and Build-to-Rent Market”, “A Report From the Frontlines: The Outlook for Leasing, Management & Operations”, “Overcoming Construction Challenges and What’s Hot and What’s Not in Architecture/Design”, “Capital Markets Update: Who’s Lending, at What Terms, and How Will Rising Interest Rates Impact The Financing Market”, and “Challenges & Opportunities in Today’s Frenetic Development Market.”  The discussions were interactive with questions from the floor taken and answered.  All discussions were very informative and confirmed the overall positive consensus of the industry that we have another very active year ahead of us in 2022 regardless of the headwinds and challenges we face.  We must, however, maintain our vigilance and stay informed.

“Just-In-Case You Missed It” is a monthly letter prepared for multifamily owners and prospective owners.  It is a compilation of multiple articles from multiple sources or a reprint of an article from a specific source (source credit given).  Its purpose is to present both facts and opinions that may influence our multifamily business in the Southeastern U.S. If you have any questions and/or would like to discuss any of the comments above, my conclusions or your multifamily business, please contact me at your convenience.  I can be a valuable resource to you without adding expense to your budget.  I look forward to speaking with you and having an opportunity to meet with you.  I am always at your disposal to assist you with your multifamily business.  If you would like to review previous editions of my monthly “Just-In-Case You Missed It” letter they are posted on my website, www.rickbakermultifamily.com. 

Respectfully,  

Rick

G.F. Rick Baker, CCIM 

Multifamily Specialist/Investment Advisor 

www.RickBakerMultifamily.com 

2504 Tinderbox Ln.

Greensboro, NC 27455

Cell: 336.549.6083 

Email: rickbakermultifamily@gmail.com 

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