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Despite forecast for a recession most professionals in the commercial real estate market are cautiously optimistic regarding multifamily and projections are far from dire.

The economic backdrop is the tailwind created by the increased cost of ownership for single family homes coupled with a nationwide shortage of housing.

Data indicates that rents began to soften in the last 90 days especially in certain markets. However, this trend is limited to a few geographical areas whereas investors continue to see moderate rent growth in some markets where office utilization rates and employment remain strong.

As the old saying goes when it comes to real estate; location…. location …. Location has never been truer.

This does not imply there aren’t challenges. There is little doubt that price discovery remains a challenge as a recalibration of property value is underway. The bid ask spreads are wide and cause for tensions between sellers and buyers.

Much of the growth in appreciation of apartments can be traced back over two decades as our economy came out of the financial crisis of 2007/2008. The Fed responded to the crisis by injecting liquidity and lower rates. Low borrowing cost stuck around for many years. Cheap money and easy access to capital drove investment.

Capital is always in search of investment. Much of this capital found its way into real estate.

Coming out of Covid and the ‘Black Swan’ event of shutting down an economy, Millennials came out of the lockdowns financial ready to be homeowners. This did not last long as the Fed aggressively started to raise rates in early 2022.  Mortgages rates hit an historical low in January 2021 @ 2.68% according to Freddie Mac but Millennials were faced with an acceleration in mortgages rates starting in July 2022. According to Forbes today the average rate on 30 yr. mortgages is 6.51%.

For a brief period of time millennials were in the housing market and demand for homes increased. In the blink of an eye, the demand shifted to apartments.

The spreads between the cost of home ownership and rental apartments widened. Apartment rents had more room to run to catch up to the cost of home ownership further increasing demand for multifamily.

As rent growth served to provide investors with motivation to close deals, the current projections in rents is slowing causing an increase in the bid ask gap.

Adding to the slowing down in rent projections is the increase in the cost of capital which is a load on net income.

This doesn’t mean deals are getting done and multifamily market is headed for a period of no growth.

There are opportunities if an investor is willing to look at tertiary markets. According to, “capital chasing better yield and growth opportunities is spilling over to these smaller cities”.

According to Real Capital Analytics, investment in sales volume in tertiary markets jumped to $147.0 billion in 2021. In 2022, 39% of deals were in these smaller cities.

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Check the background of this financial professional on FINRA's BrokerCheck