Inflation Trends

  • Deflation in Major Categories: Recent data shows positive trends, with many spending categories experiencing deflation. Headline and Core CPI have remained around 3% over the past six months, and PPI, despite a rise, shows overall improvement. 
  • Inflationary Pressures: Elevated inflation persists in wages (3.8%-4.9%), rents (4.0%), and crude oil. The potential for a Fed rate cut in September is high unless inflation data suggests otherwise.

Energy and Inflation Risks

  • Strategic Petroleum Reserve: Reduction in reserves and aggressive transition to clean energy pose risks for future energy-driven inflation. 
  • Energy Independence: The cancellation of Alaska oil drilling permits may jeopardize the USA’s energy independence and increase future gas prices.

Job Market Analysis

  • Labor Market Cooling: The job market has weakened with job openings down 32% from peak levels. Wage growth has decelerated to 4.5% year-over-year, providing the Fed with grounds to cut interest rates to avoid an economic downturn.

Economic and Multifamily Real Estate Outlook

2024 Predictions: A dynamic year expected, influenced by presidential and congressional elections, economic recovery, and real estate opportunities. Multifamily assets are projected to be attractive buys at lower prices.

Top 10 Influences: Key factors include political partisanship, Fed rate cuts, inflation trends, stock market behavior, and institutional investor activity.

  1. Politics: Highly partisan campaigns, with significant attention on the presidential and congressional races.
  2. Fed Rate Cuts: Expected cuts of 100-125 bps to aid economic soft-landing, with a predicted 10-Year Treasury rate of 2.75%-3.25%.
  3. Inflation: Mostly under control, but pressures in wages, energy, farm products, and rents remain.
  4. Stock Market: Expected to rise, though major gains may already have occurred.
  5. Institutional Investors: Likely to re-enter markets, increasing transaction volumes.
  6. Multifamily Overpricing: Distress expected for those who bought overpriced multifamily properties in 2021-2022.
  7. Distressed Debt: Increased activity expected in distressed debt deals and Pref Equity, but plain vanilla investments will also return.
  8. Multifamily Supply: Continued delivery of new supply offers opportunities to buy new construction deals at attractive prices.
  9. Occupancy and Rental Rates: Increased supply will pressure occupancy rates and rental rates, affecting financials.
  10. Multifamily Prices: Expected to bottom out, providing a compelling buying opportunity.

Revisiting Inflation Causes

  • Quantitative Easing: The primary cause of inflation is attributed to excessive QE and government stimulus, leading to a 43% increase in M2 Money Supply from February 2020 to early 2022. 
  • Federal Debt and Fiscal Policy: High federal debt-to-GDP ratios and increased unfunded obligations pose significant risks to the US economy. 
  • Interest Rates Outlook: Predicted to normalize between 1.7% and 3.0%, affecting multifamily cap rates and borrowing costs.

Multifamily Market Implications

Investment Strategy: Despite macroeconomic challenges, multifamily assets remain essential, with a focus on quality acquisitions and property-level execution to ensure long-term returns.

Are you ready to stay ahead of the curve in 2024? 

As we navigate through an evolving economic landscape, understanding the latest trends in inflation, job markets, and multifamily real estate is crucial. Our comprehensive 2024 Mid-Year Economic and Multifamily Outlook delivers the insights you need to make informed investment decisions. Featuring in-depth analysis, detailed charts, and graphs, this report is your ultimate guide to leveraging market opportunities and mitigating risks.

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