Latest Federal Rate Increase Puts Pressure on Capital Markets

Experts widely expected the Federal Reserve’s latest, and possibly last, increase to the federal funds rate. However, this does not mean it can be overlooked; commercial real estate finance professionals have noted its implications. Zachary Streit of Way Capital commented that Jerome Powell is determined to fight inflation and that capital markets are becoming increasingly difficult for deals due to regional bank volatility. Carlos Vaz of Conti Capital added that while the Fed has softened their language around further rate hikes, they still leave room for continuation which puts strain on multifamily real estate as debt costs rise and transaction volume slows down despite a housing shortage. Lawrence Yun from National Association of Realtors called these increases “unnecessary” and “harmful,” noting how consumer price inflation has been decelerating with an awful 9% in summer 2019 now at 5%. He also highlighted how small regional banks are struggling against big banks due to fast rate hikes by the Federal Reserve – only stopping or reversing later in year after verifying calmer inflation rates could help them survive better.