inflation

Eviction Moratorium Report | August 2021

Rising infections prompt moratorium extension. On Aug. 3 the Centers for Disease Control and Prevention enacted a new order halting residential evictions in counties with substantial or high levels of COVID-19 community transmission.
Federal aid and job growth lower eviction pressure. Contrary to initial expectations, rent collections have held up fairly well during the health crisis.
Multifamily sector performing well. Rental demand has already recovered substantially from last year, with a record number of apartments absorbed in the second quarter.

Court backlog may provide time for aid to arrive. Congress has allocated close to $47 billion in rental assistance, with $25 billion released so far, but the rollout has been slow.
Estimates of renter hardship likely skewed by statistical issues. Some higher-end estimates of rent delinquency have come from the Household Pulse Survey, a recent experimental dataset.

Fed believes inflation is transitory, driven up by short-term logistical bottlenecks and surge in consumption
Likely trying to keep interest rates low and money flowing

What are the Factors Driving Inflation?

Some inflation drivers are transitory, like commodity prices
But other strong drivers, such as rising wages and housing costs, tend to remain in place longer
If the inflation risks remain, Fed may be forced to take action earlier than expected and raise interest rates

Why Commercial Real Estate Investors are Well Positioned

Apartment, Industrial and Self-Storage saw strong Y-O-Y rent growth in 2Q, underscoring CRE’s inflation resistance
Low interest rates and high liquidity create great buying conditions, but future rise in rates may limit this window
High buyer demand also provides a prime opportunity for sellers that want to cash out or switch property types

* Through June
Sources: Marcus & Millichap Research Services, BLS

Early signs of rising inflation are beginning to show up in the marketplace

Two main factors point to an increase in inflation over the short-term:
- Government spending flooded the market with cash to offset the pandemic
- Production pipelines thinned and supply chains can’t keep up

As a result, demand for goods/services is outpacing supply, driving prices up

Real estate is known as a strong hedge against inflation
- Many lease terms include inflation escalation clauses that automatically lift rents
- Leveraged returns are amplified in a rising inflation environment

Those looking to diversify their exposure to inflation risk, may find CRE as an attractive investment option