Brennen Degner Interviewed by Multifamily Dive on How Multifamily Pros Have Been Reacting to the Interest Rate Pause

June 21, 2023

MULTIFAMILY PROS REACT TO INTEREST RATE PAUSE

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Fed Chair Jerome Powell said during a press conference last week that policymakers suspended rate hikes to take time for assessing the impact from 14 months of monetary tightening. Rate increases usually require a year or more to restrain economic growth, the job market and price pressures.

Jordon Emmott, co-founder of New York City-based brokerage firm Global Real Estate Advisors, was surprised by the announcement.

“I believe we are still likely to see one to two additional rate hikes between now and the end of the year,” he said. “This news, however, is certainly a breath of fresh air for buyers who have property under contract. Closing becomes extremely challenging when interest rates are rising. The economics can get out of balance in a hurry, which is what we have been fighting through the past 18 months.”

But outside of that, the news was generally greeted with shrugs from apartment owners and brokers.

“I don’t see the recent pause as having a material impact on the current environment just yet,” said Brennen Degner, managing partner and CEO of Denver-based apartment owner DB Capital Management. “The pause is a step in the right direction but the general narrative around there being the potential for one to two more hikes still creates the same uncertainty as existed before the pause announcement.”

The rate pause won’t influence multifamily sales or financing, according to John F. Rodiles, national sales manager of Costa Mesa, California-based investment advisory firm The Mogharebi Group.

“Any hike would have amounted to a small increase of the now 5.00% to 5.25% rate,” he said. “We don’t see client sentiment improving or activity started based on this news.”

Even though there is a pause, for now, the possibility of future rate increases clouds the market for some. “While the Fed pausing rate hikes would have typically been positive, commentary around future rate hikes contributes to overall uncertainty and causes a level of anxiety in the market,” said Mark Fogelman, president of Memphis-based owner and manager Fogelman.

Until that happens, there won’t be true stability in the market, according to Emmott.

“The true impact will not be felt until the Fed says, with vindication, that inflation has been tamed and they are finished raising rates,” he said. “At that point, buyers will be able to confidently tailor business plans around economic policy, and demand will rise.”

CFO Dive Senior Reporter Jim Tyson contributed to this report.