As the inflationary environment intensifies, multifamily deals with pre-existing loans and favorable interest rates will be the most popular in the coming months. Stabilized properties will also be in even greater demand because they can offer higher returns and more certainty, according to one industry veteran.
According to Otto Ozen, Executive Vice President of The Mogharebi Group, the asset class will continue to be a desirable inflation hedge because it has historically outperformed other asset classes from a yield perspective, and demand drivers are still strong given that the costs of homeownership are still staggeringly out of reach for many prospective buyers.
He claims that when mortgage rates increase, the affordability gap grows, raising the entry barriers for home buyers and ultimately pushing them into renting. Because of this change, the rental market will be robust and rental rate growth will outperform inflation.
At a panel discussion at GlobeSt’s upcoming Multifamily Conference in Los Angeles in October, Ozen will elaborate on these observations and provide more perspectives on what will make multifamily deals successful in the current environment. He says he’ll be keeping an eye on core inflation and interest rates going into 2023 to better understand transaction velocity. He mentions that value-add and opportunistic deals may start to slow down as the risk involved with these transactions increases as interest rates rise.
