The real estate market is adjusting to current interest rates and recent shifts in professional working arrangements. The most obvious shift has been the move to remote work, but the impact of interest rates is sneaking up on many property owners, big and small.
Historically low interest rates in the years 2020-2022 provided a lot of cash to multi-family investors, making floating rates and short-term loans attractive. However, the rapid rise in interest rates in mid-2022 foiled many investors’ plans to refinance their short-term loans or floating rate loans. Now, those investors are finding themselves in a difficult situation.
Even though rents are rising at nearly double the rate of previous years, portfolio managers are finding that they need to reinvest all of their income just to pay the bills. This is because their interest payments have increased so much.
The rise in interest rates is being caused by a number of factors, including the Federal Reserve’s efforts to combat inflation. The increase in remote work is also having a significant impact on the real estate market, as it is leading to a decline in demand for office space and an increase in demand for rental housing.
The real estate market is cyclical, and it is likely that the current challenges will eventually subside. However, it is important for property owners to be prepared for the possibility of further volatility in the market.