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APARTMENT INDUSTRY EXPERTS
DISCUSS IMPACTS OF RISING INTEREST-RATE ENVIRONMENT
By Paul Bergeron
n March, the U.S. Federal Reserve approved rate environment could have a modest effect on its first interest rate hike in more than three apartment investment and performance. Going years, “an incremental salvo to address spiraling forward, the industry will be more focused on rising inflation without torpedoing economic growth,” inflation, the cost of capital, asset prices and cap reported CNBC. rates, rent growth and investment sentiment.
The quarter-point (or 25 basis points) increase Given the healthy state of the apartment industry, brought the rate into a range of 0.25% to 0.5%. AppFolio discussed with leading apartment economists and executives what could happen, and
Along with the rate hikes, the committee also potential ramifications.
penciled in increases at each of the six remaining meetings this year, pointing to a consensus funds rate of 1.9% by year’s end. That is a full percentage point higher than indicated in December. The committee sees three more hikes in 2023, and none the following year. Market analysts in late March suggested that the next few rate hikes would be for 50 bps. It’s worth noting that the 10-year Treasury Bond yields as of March 28 had doubled since August, contributing to rising home mortgage rates, as well.
The Fed’s action of late in this rising interest
UNDERLYING APARTMENT FUNDAMENTALS ARE ‘BEST EVER’
Greg Willett, First Vice President, Research Services, Institutional Property Advisors, said the forces spurring the Fed to put upward pressure on interest rates are tied to strong economic growth.
“Elevated inflation is a byproduct of outsized economic growth during a period of product and commodity shortages,” Willett said. “Underlying apartment fundamentals are the best ever, and
AMM4 APARTMENT MANAGEMENT MAGAZINE - MAY 2022 85