Will the Multifamily Roller-Coaster Ride Lead to a Crash?

Abstract

Many multifamily investors expect they could survive a period of lower returns because rents will keep growing. If rent growth slows, owners who paid exorbitant prices for multifamily buildings could be at risk as rising interest rates push down building values and make it more challenging to refinance mortgages. Is the rent too damn high? Jon Ziglar, CEO of Rent., a platform that connects properties with residents, said most of the largest rent increases have been in Class A and luxury multifamily properties in big gateway markets. With many residents behind on rent or struggling to keep up, there could be a tipping point on how high landlords can push rents. Multifamily rents are able to adjust relatively quickly for inflation and interest rates, according to a recent Moody's report. The U.S. housing supply currently has a shortfall of 6.8 million units, according to the National Association of Realtors, which is why rents spiked 13.5 percent last year, more than double any previous year on record. CBRE projects a 6.4 percent nationwide rent increase for 2022, which may be skewed because of more significant increases in Class A properties.