Wednesday, May 25, 2022

Wall Street Journal - Rising Interest Rates Concern Apartment-Building Owners, Renters

The Wall Street Journal reports rising interest rates and purchase prices are reducing return rates for apartment investors, due in part to the dramatic increase in purchases during the pandemic. 

"The annual volume of rental-apartment purchases almost doubled between 2019 and 2021, according to CBRE Group Inc. In the first quarter of 2022, investors spent $63 billion on apartment buildings, the highest figure on record."

The steep increase in interest rates this year has created "negative leverage," meaning landlords make less money on their buildings than their banks, which the WSJ notes "hasn’t been this widespread since the subprime crisis when defaults on apartment-building debt soared." 

However, according to the WSJ article, we are not headed toward the defaults of the subprime crisis, as investors today are less indebted, and multifamily rentals remain an appealing and stable investment asset. 

Read more at WSJ.com

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