INSIGHTS

Wind in the Willows

Fed Funds, International Central Banking, and Multifamily Real Estate
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Fed Funds, International Central Banking, and Multifamily Real Estate

Fed Funds, international central banking. On Wednesday of last week, the Federal Reserve made its highly anticipated pause in interest rate hikes following CPI Data that suggested that inflation continues to cool. The 4% print was in line with expectations and continues a downward trend that has been in place since June of 2022. Thankfully, it was low enough to warrant pausing to reassess the effectiveness of rate increases from the last year and a half. As we have mentioned in the past, we do not anticipate a rapid decline in rates because while 4% is still getting better, it is still double the Fed’s target of 2%.

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Too Big to Fail Means “Safe”?
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Too Big to Fail Means “Safe”?

In today’s episode of Regulatory Roulette, we’re reminded of the phrase “Too Big To Fail” and what it meant in the darkest days of the Global Financial Crisis.  This phrase was used to discuss the biggest and nastiest of our systemic issues as Lehman Brothers failed and AIG, Citigroup and others teetered before TARP ultimately came to the rescue.  Today, it’s means something different. 

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The Finger Pointing Game
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The Finger Pointing Game

We’ll gladly get on board and criticize the Fed for any number of things.  Money printing in the months following the initial shock of Covid, not raising rates after the Global Financial Crisis, chickening out late in 2018 during the “Taper Tantrum”…the list goes on.  But to suggest that the ills of the banking system and commercial real estate markets are “all their fault”?  Well that’s a step too far for us. 

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Rent Growth – There is a Road, But it’s No Simple Highway
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Rent Growth – There is a Road, But it’s No Simple Highway

2022 ended with a giant thud for rent growth.  As can be seen in the charts below, vacancy rates were up and rent growth was negative by more than it has been in a long time.  As 2023 began, the picture appeared slightly rosier for the asset class.  Vacancy rates continue to head higher, but a resilient renter has meant 2 months of positive rent growth.  This is far from intuitive given recent layoff headlines. 

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VC to Slow Following SVB Collapse
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VC to Slow Following SVB Collapse

Years ago, a colleague/mentor shared a truth about the investment industry that few people stop to think about.  You can be a good investor, or you can be really good at the investment business…very few people are both.  In an ideal world, investment managers combine people with both skills for ultimate success, but few ever find the right mix.   But what’s the difference: A good investor, buys low, sells high and manages the risks between.  Someone who is good at the investment business is generally really good at gathering assets.

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