The Gray Report Podcast

Multifamily fundamentals remain strong amidst an uncertain economic environment, which is as true today as it is reflective of the historic performance of the apartment market. Even so, we have seen a slowdown in rent growth as we approach the end of the year, and while this pullback in rent growth is in line with typical seasonal trends, recent reports have found a number of steady-growth markets...

Even as apartment demand continues to normalize and ever-increasing interest rates create more challenges for investors, reports published this week emphasize the performance and stability of private commercial real estate investments like multifamily apartments, which have historically been valued as less volatile and better-performing alternatives to the stock market during periods of economic u...

Newly published reports and examinations of the housing environment and multifamily market underscore the impacts of the Fed's latest rate hike as we head into the final quarter of the year. Apartment rents are trending toward a seasonal slowdown in line with pre-pandemic trends, and while home values are falling, housing affordability remains a problem. Despite these headwinds, the multifamily ma...

The Federal Reserve's 0.75% increase in the federal funds rate places even more pressure on the economy, and as home prices show consistent signs of a cooldown, multifamily investors are watching the market closely. While single-family home prices are correlated with multifamily rents, apartment rent growth has not seen the same declines, partly because average monthly payments for single-family h...

Stock markets fell after the latest CPI report showed higher-then-expected inflation, but the nominal increase—0.1% month-over-month—is relatively low. More significantly, the CPI shows that rental housing has become one of the most powerful drivers of inflation. Notably, market rate apartment rents remain below the 30% unaffordability threshold, and elevated mortgage rates have kept rental housin...

Apartment industry professionals expect continued pressure from interest rates and inflation through the rest of the year, with many expecting mild cap rate expansion in the near future. That being said, the multifamily market's strong fundamentals and history of stable performance amidst economic volatility leaves open the possibility of greater investor interest, especially in the wake of such s...

Despite continued turbulence in the economy, persistent trends in the multifamily market and commercial real estate are sharpening many projections for 2022 and 2023. A recently-published cap rate survey further highlights the effect that the Federal Reserve's interest rate regime has had on CRE markets, and several recent multifamily reports show how the higher-performing apartment markets of 202...

Sales volumes for single family homes have decreased significantly due to increasing mortgage rates, but with the slowdown so strongly linked to interest rate hikes, there is no evidence that would suggest an implosion or collapse. Housing demand remains strong, but the sharp increases in average mortgage payments have priced a growing number of people out of buying a home. As reports published th...

Adam Neumann was ousted as CEO of the office-sharing company he founded, but Andreessen Horowitz's $350 million investment in Neumann's multifamily-focused venture, the largest first-round investment in Andreessen Horowitz's history, is a substantial second chance for Neumann. It is not surprising that more investors are entering the apartment investment market, as multiple reports published this...

Last week's jobs numbers revealed a stronger-than-expected labor market, and the just-released CPI report shows that inflation has leveled off and could be heading down. The economic anxieties of 2022, however, will not be so easily dispelled. Wage growth from the strong jobs market has the potential to re-ignite the rising prices of previous months, and apartment rents are becoming an increasingl...

In the face of mounting anxieties about the broader economy, several reports were published this week that analyze the long-term and short-term risks for the multifamily market, from consumer sentiment, to apartment performance during a recession, to the prospect of lower population growth. In this episode we discuss the likelihood of these risks, how the multifamily market might perform if these...

Along with negative GDP numbers for Q2, the second consecutive 0.75% rate increase from the Federal Reserve comes as reports on decreased home sales show the impact of previous rate hikes. In the multifamily market, higher cost of leverage is expected to continue to further impact cap rates and asset prices as more apartment buyers are unable to make their investment plans work in a higher interes...

As rising interest rates and inflation do little to resolve the housing affordability crisis, anxious stories about excessively high rents are not difficult to find. Recent reporting on renter income trends and household formation, however, suggests that there is room for apartment rents to grow, especially among lifestyle and middle-income renters at class A and B properties. For the latest multi...

A certain strain of anxiety has carried forward from the bigger-than-expected employment numbers in last week’s jobs report to the inflation numbers in this week’s consumer price index. This heated economy is expected to bring an additional 75+ basis-point interest rate increase from the Federal Reserve, and within this heightened economic atmosphere, apartment assets have taken an increasingly in...

Rate hikes from the Federal Reserve and greater economic uncertainty have had a clear affect on investor demand, with fewer investors and purchasers able to make multifamily projects work in an elevated interest rate environment, which could lead to higher cap rates. At the same time, the fundamentals of apartment assets are as strong as ever, to the point where rising apartment rents are expected...

The multifamily market continues its stable performance and elevated rent growth, but there are signs of changes in housing demand in the coming months, with the Case Shiller Home Price Index showing a slight decrease in single family home price growth. Apartment demand, however, should remain high, with multiple reports published this week supporting the resilience of the multifamily market. For...

It has only been one week after the Federal Reserve's recent interest rate increase, but the effects of the Fed's earlier interest rate movement are clear in the reduced sales volumes for single family homes and lower housing sentiment in general. While the Federal Reserve's actions have had a noticeable effect on home buyer demand, overall housing demand has changed very little, and rising apartm...

The Federal Reserve's 0.75% increase in the Federal Funds rate is the largest since 1994, causing some volatility in the stock market this week and leading to some anticipation of higher cap rates for CRE markets in the near term. Multifamily assets, however, have continued to perform very well, with several reports published this week noting how rising single-family mortgage rates have driven mor...

Steady apartment rent growth and continued investor interest in multifamily properties have led to optimistic assessments of the market, even though this year's rent growth is not expected to return to 2021 levels. Discussions of the housing market as a whole are, even in this reduced-sales-volume, higher-interest-rate environment, consistently marked by the mention of our low housing supply. Lumb...

As the Federal Reserve moves forward with Quantitative Tightening along with its recent interest rate increases, home sales have gone down slightly, but still-elevated home prices and persistent difficulties with housing construction continue to keep housing demand high. While homebuyers are balking at elevated mortgage payments, multifamily rent growth is expected to remain strong and stable as p...

Apartment properties and the commercial real estate market as a whole have historically been secure investment options during inflationary periods like the one we are currently facing, and while multifamily sales volumes may be reduced due to rising interest rates, properties in more competitive, low-cap-rate markets may be more sensitive to these changes than those in other markets. Reports publi...

As prices continue to rise throughout the economy, the Biden administration has announced plans to address the rising cost of housing specifically, and while these plans have not yet been implemented, they reflect a growing amount of public attention on housing affordability. While much of this attention is centered around the affordable housing space, the issues and policies associated with affor...

Apartment investors are seeing a re-pricing of assets off the extreme low cap rates driven by low interest rates and enticing bridge and debt fund financing that has fueled the historic price growth seen since the start of the pandemic. At the same time, several reports published this week find that multifamily assets themselves continue relatively stable growth as rents continue to rise and occup...

The recent .5% rate increase from the Federal Reserve may have been expected, but the effects of these rising rates are more open-ended. Jerome Powell acknowledged the difficulty in managing inflation without precipitating an economic downturn, but he also noted that our strong job market makes an economic crisis less likely. In the near term, rising mortgage rates are moving home buyers into the...

The multifamily market has continued its strong performance, even as recent ups and downs in the stock market, high inflation, rising interest rates, and growing recession worries impact the economy more broadly. Employment and demographic trends point to continued apartment rent growth and elevated demand, especially in markets with robust and growing local economies. For the latest multifamily n...