Rising Inflation: What Is The Impact On Multifamily Investments?

Concern over the inflation figures from the last week's consumer price index has exacerbated the higher-than-anticipated employment numbers. This heated economy expects to bring an additional 75 basis-point interest rate increase from the Federal.?

Inflation soared in June, continuing to climb at the fastest pace in 40 years across several sectors of the economy, driven majorly by the higher?energy?prices.

Via way of The Washington Post - The energy index, which increased 7.5 per cent compared to May (41.6 for the year), is?responsible for over half of the overall inflation increase, causing the startling jump.

Rents rose in?the U.S. last month at the fastest pace since 1986, helping to propel overall inflation to a fresh four-decade high.

An index measuring rent of a primary residence was 0.8% higher in June than the month before, an acceleration from the 0.6% increase recorded in May, according to the Labor Department’s report on consumer prices published Wednesday. In the 12 months through June, rents were up 5.8%.

Rents Outpacing inflation = Multifamily Investor Opportunity

Because both multifamily apartment values and rents continue to outpace inflation, this asset class continues to be appealing to investors. This is particularly true given that multifamily demand is projected to remain robust throughout the coming years.

Experts Take!

“More people are opting to live alone, and rising mortgage-interest rates are forcing would-be homebuyers to keep renting…These are among the demand-side pressures keeping rents sky-high. While renting has become more expensive, it is now more attractive than buying for many Americans this year as mortgage payments have surpassed rents on many homes. Although we expect rent-price growth to continue to slow in the coming months, it will likely remain high, causing ongoing affordability issues for renters.”— Taylor Marr, Redfin Deputy Chief Economist

“Moderating demand and rent growth were widely expected, and it appears to be finally happening…The open question is whether the market is entering a true slowdown due to inflation or it’s stabilizing toward more sustainable, balanced levels. We tend to take the latter view.”— Jay Parsons, RealPage’s Head of Economics and Industry Principals.