The Real Estate Capital Scoreboard® – July, 2021

 

Chicago, Illinois, July 1, 2021 – The continued labor and materials shortages threaten the Fed’s ability to tame inflation.  The Fed’s target of two percent annual growth now exceeds three percent.  However, the Fed states that inflation pressures rank as a temporary concern.

Mortgage rates barely changed.  Since late May, overall benchmark rates fluctuated about twenty basis points and dropping about fifteen basis points by the end of the month.  The five and ten-year treasuries steadily maintain a sixty-basis-point spread.

Even as rates stay consistent, demand continues unabated for realty assets.  The realty capital markets gain from inflation fears as the property investment sector is seen as one of the best inflation hedges.  Pricing remains exceptionally tight, fueled by solid demand, a limited supply, and low mortgage rates.  Nearly all asset categories with reliable cashflows enjoy favorable pricing, especially as the pandemic recovery brings more need for goods and services (travel-oriented projects.)

Many examples reflect rising values during the past years. Home prices nationally increased about twenty percent over the past year.  Multifamily and industrial assets rose at about half this rate – impressive by any current investment standards.  The lodging sector also shares pricing appreciation, although the growth rates are erratic, depending upon tourism vs. business travel.  The laggards, offices, and overbuilt retail properties, reflect unpredictable volatility.  Yet, many see these sectors as selective opportunity plays, driven by specific circumstances.

The Director of The Real Estate Capital Institute’s® Director, John Oharenko, states, “Generally speaking, inflationary fears traditionally move more capital into hard assets, with real properties emerging as one of the top categories.”

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