Taylor welcomes Neal Bawa back to dive into the state of the economy, inflation, interest rates, and how the banking crisis is affecting real estate now and in the future. Neal believes that the banking crisis will have extraordinary repercussions for the world and that it has acted as a catalyst for everyone to shine a floodlight on what else in the economy could go wrong. However, he notes that multifamily has the lowest exposure to mid-size banks of all real estate asset classes, making it less vulnerable to this crisis. One key takeaway from this conversation is that data insights are vital to figuring out what’s next in hacking real estate.
[00:01 – 12:06] Opening Segment
- Introducing Neal to the show
- The state of the economy, inflation, interest rates, and the banking crisis’ impact on real estate
- Government organizations primarily fund multifamily loans
- Interest rates may decline, but fewer lenders in the market could offset any benefits
- Property quality will determine the impact of interest rate changes and lender pullback
[12:06 – 22:50] Significant Discounts and Distress in US Property Markets
- Brokers are seeing a lot of cash calls in the industry in April
- Discounts of 18-26% are already available in markets like Phoenix and Atlanta
- Savvy investors see this as a great time to buy, but 90% of investors are freaked out
- Inflation is under control due to significant movement in the labor market
- March saw a moderation and weakening, with major industries pulling back and layoffs happening
[22:51 – 26:53] Long-term Inflation and Single-Family Housing Markets
- Layoffs are happening in various sectors due to CEOs managing a recession
- Inflation is under control in the short term, but the long-term outlook is concerning
- The single-family market has performed outstandingly well despite predictions of a decline
- Debt fixed rates have prevented distress in the single-family market, while the multifamily market struggles with floating debt
[26:54 – 30:17] Closing Segment
- What is one thing we are not discussing that we should be?
- Long term inflation
Quote/s:
“Nobody anywhere on this planet, including all the federal reserves banks put together, can put the long-term inflation genie back in the bottle.” – Neal Bawa
