On Tuesday, the release of the Consumer Price Index (CPI) brought positive news for the National Multifamily Housing Council (NMHC). According to Chris Bruen, NMHC’s senior director of research, there is a delay between asking rents and what is reflected in CPI data. This has implications for the Federal Reserve’s monetary policy.
Excluding shelter costs, core CPI only increased by 2.1% from November last year – meeting the Fed’s target level. However, headline inflation remains high at 3.1%.
Bruen stated that November’s CPI reading shows progress for the Federal Reserve in their efforts to lower inflation rates. But as long as headline inflation stays above their target of 2%, interest rates are likely to remain elevated – posing risks not just directly but also indirectly on industries such as apartments.
The direct impact can be seen through reduced apartment sales volume and new construction projects which will ultimately lead to higher rental prices and worsened affordability conditions in future years according to Bruen.
Indirectly speaking though it could have an effect on job market strength along with overall economic stability “which hasn’t fully digested rate hikes already enacted” he added.
This post highlights how higher interest rates continue being a risk factor within multifamily sector without mentioning Connect CRE or any other specific location-based organizations.
