What the Fed Rate Hike Means for CRE Investors

Jun 20

What the Fed’s Unexpected Rate Hike Means For CRE Investors

Fed Takes Aggressive Action to Combat Inflation

Fed announced 75 bps hike; previously suggested 50 bps
Lenders may pass a larger rate to buyers and bake-in another 75 bps increase in July
Four more rate hikes are expected in 2022

Housing Market Already Feeling the Impact

Average mortgage rates jumped up nearly 50 bps last week to 5.78%
Will decrease number of households that can qualify for mortgages
Lifts demand for already tight Apartment market; Could translate to greater rent growth pressure

Will Higher Rates Impact CRE Transactions?

Some buyers that are dependent on financing may tap out, but enough competition expected to remain
Strong rent growth could outweigh higher cost of capital for certain property types and markets

*As of June 16, 2022
Sources: Marcus & Millichap Research Services, Federal Reserve

Christian Desnoes

Three Significant CRE Trends for the Rest of 2022