What the Fed’s Unexpected Rate Hike Means For CRE Investors

Fed Takes Aggressive Action to Combat Inflation

• Fed announced 75 bps hike; previously suggested 50 bps
• Lenders may pass a larger rate to buyers and bake-in another 75 bps increase in July
• Four more rate hikes are expected in 2022

Housing Market Already Feeling the Impact

• Average mortgage rates jumped up nearly 50 bps last week to 5.78%
• Will decrease number of households that can qualify for mortgages
• Lifts demand for already tight Apartment market; Could translate to greater rent growth pressure

Will Higher Rates Impact CRE Transactions?

• Some buyers that are dependent on financing may tap out, but enough competition expected to remain
• Strong rent growth could outweigh higher cost of capital for certain property types and markets

*As of June 16, 2022
Sources: Marcus & Millichap Research Services, Federal Reserve

Watch the Video Below