Question: How are interest rates affecting the market right now? Greg: Interest rates have increased nearly 300 basis points since this time last year. It has had a significant impact on the commercial real estate slowdown. Question: What are you seeing with the rent growth rate?
Greg: Rent growth has come to a halt with declines in some tertiary markets.
MIDWEST Q2 MARKET SUMMARY Some key takeaways from IPOS’s 2nd Quarter Report (www.incomepo. com/2nd-quarter-2023) include: 1. As the market adjusts to 10 consecutive federal funds rate increases, IPO saw sales volume down 75%. 2. Transaction numbers have been so low that market par- ticipants are mostly in “price discovery mode.” 3. Many market participants with loans maturing are now being forced to sell versus refinance as rates have had a drastic impact on cashflow and value. 4. In addition, lenders are tightening credit, especially in the last 60 days. 5. Further, the failure some banks have had with falling deposits and the resulting impact on bank reserves is affecting their ability to lend. 6. One upside is the expectation
Despite increased interest in the Midwest multifamily market from investors, the historic pace of inter- est rate hikes by the Federal Reserve has had an effect on sales activity.
the Fed will be forced to lower rates at the end of 2023 or the beginning of 2024.
So, even with increased interest in Midwest multifamily investing, it seems the pace of the Federal Reserve’s interest rate hikes have slowed activity. Despite this, there is optimism heading into the end of 2023 and the start of 2024, if the Fed cuts rates. •
Jeff Roth is the founder of Arbor Advising in Ann Arbor, Michigan. Arbor Advising is a real estate consultancy dedicated to growing and securing
clients’ wealth. They are passionate about helping clients invest, buy, and sell in Michigan. You can contact Roth at jeff@arboradvising.com, visitarboradvising.com, or subscribe to the weekly newsletter at www.arboradvising.com/subscribe.
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