Are Investors Backing Down?

Happy Tuesday! This is The Real Deal. The email that tells you the latest that's going on with Real Estate in plain jane english.

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In Today's Email:

  • 💲 Are Investors Backing Down?
  • 📊 3 Multifamily Trends Happening Right Now


Are Investors Backing Down?

Marcus & Millichap recently put out a video asking the question of, "Are CRE Buyers Moving to the Sidelines?"

If you have 5 minutes, it's a great video to watch, but if not, here is biggest takeaway:

Investors are NOT backing down, but rather refocusing
With all the bad press going around with interest rates rising and housing prices soaring, the truth is that finding good deals is getting tougher.

However, the focus is shifting towards tailoring their investments toward asset classes that produce a higher return.

Getting out of real estate is simply not an option with an asset class that benefits from inflationary periods.

The Real Deal's Take: we've noticed clients be content with lower returns for their MF's (ex. 8% COC) because 6 months ago that would have been a 10% COC with lower interest rates. Other clients have been pivoting to just wanting STR's.

The nice thing about real estate is that it offers a broad spectrum of returns based on appetite

3 Multifamily Trends Happening Right Now

Here are the three biggest trends in multifamily reported by Marcus and Millichap happening right now...

#1: Sizable Job Creation Fuels Renter Demand
Job creation totaled 1.7mm in the first quarter of 2022 ranking the second-strongest first quarter on record.

#2: Room Left For Substantial Upward Rent Movement
While improving rents in gateway metros is encouraging, these markets still lag most of the country in performance over the past two years. All six of the major metros in this category posted two-year rent increases below the 17.3 percent U.S. average and fell well short of the pricing jumps of more than 30 percent recorded in several key Florida markets, as well as Phoenix, Las Vegas and Riverside-San Bernardino.

#3: Momentum set to shift to gateway markets
Looking ahead, gateway metros should maintain higher rent growth momentum relative to the country as a whole or today’s best performing metros. Monthly rates have yet to jump significantly in most gateway markets relative to what is occurring in some other locations where new residents are filing in more rapidly.

Job growth is coming back the strongest since 1941!

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