Gray Report Newsletter: April 20, 2023

A recent article from Charles Schwab claims that the Federal Reserve will avoid further rate hikes, but these lower interest rate forecasts are accompanied by the expectation of an economic downturn. In the multifamily market, a recent rent growth report has recorded a rare year-over-year rent decrease, but when viewed alongside numerous other reports showing improving performance for multifamily assets, it is clear that rent growth is strengthening as we enter into peak leasing season.

Multifamily, the Nation, and the Economy

Are Interest Rates Headed Down?

Via Charles Schwab: “The Federal Reserve may hike rates again in May, but if so it’s likely to be the last rate hike of the cycle. Although the Fed’s favorite inflation indicator remains stubbornly high, the risk of a credit crunch and/or a recession has risen, particularly after banking stress appeared in March.”

• Apartment Markets with the Lowest Rents (RealPage)
   
• Multifamily Turns to Alternative Financing in a Down Market (GlobeSt)
   
• Optimizing CRE Debt In a Changing and Unpredictable Market (WealthManagement.com)
   
• Building Materials Prices Climb as Concrete, Transformer Shortages Persist (NAHB)

Multifamily and the Housing Market

Millennial Homeownership Report, 2023

Via Apartment List: Lower homeownership “highlights the growing importance of multi-family housing, the industry sector that rebounded fastest after the Great Recession and has continued to receive steady investment over the past year even as rising interest rates tempered single-family development.”

• Foreclosures Jump—Is Another Wave About To Flood the Housing Market? (Realtor.com)
   
• Fannie Mae Home Price Index, Q1 2023
   
• Inflation Pressures Are Stressing Renter Households (Harvard JCHS)
   
• Underwriting Assumptions Stabilizing for Prime Multifamily Assets (CBRE)

Multifamily Markets and Reports

Rent Report Shows Negative YoY Growth. How Can This Be?

Via Redfin: This recent report from Redfin records negative annual rent growth, but comparing its rent growth data with reporting from other sources (see above) shows the volatility of Redfin data.

• Student Housing National Report, Q2 2023
   
• Single-Family Home Rent Growth Declined for 10th Straight Month in February (CoreLogic)
   
• Manufactured Home Communities National Report (Marcus & Millichap)

Commercial Real Estate and the Macro Economy

Global Real Estate Perspective, March 2023

Via JLL: A variety of economic headwinds were evident in the final quarter of 2022, with inflation rising, interest rates climbing, and growth slowing. However, there are now signs that the outlook is improving and the slowdown will be relatively short and shallow.

• Special Report: Banking and CRE Distress (Institutional Property Advisors)
   
• Distress Sales Remain Low, But They Are Coming (Colliers)
   
• How real estate investors are facing a core-asset shortage (JLL)
   
• US manufacturing boom has a real estate problem (Reuters)

Other Real Estate News and Reports

National Office Report, April 2023

Via Yardi Matrix: With housing in short supply and many office buildings sitting vacant, conversions appear to be an attractive opportunity for many owners and investors. While conversions have become more common as of late, though, they will likely not be the answer to the nation’s housing shortage.

• National Self Storage Report, April 2023
   
• Inflation Surprises, Biden’s Commitment to Housing Affordability, and Making the Case for Large-Scale Mixed-Use Development (Moody’s Analytics)
   
•  Marijuana and Real Estate: A Budding Issue (NAR)
   
• CRE ‘Very Much On The Watchlist,’ White House Says (Bisnow)