IMG Staff Attends Chapman University’s Economic Forecast Conference

Woodland Hills, CA— December 15, 2023 — IMG staff recently participated in Chapman University’s highly regarded 2023 Economic Forecast Conference held on Thursday, December 14th, featuring a hybrid virtual and in-person format. The conference, renowned for its accurate predictions compared to industry benchmarks like the Blue Chip Economic Indicators survey, included live Q&A sessions with experts.

Chapman University’s bi-annual economic event provided a comprehensive analysis of the 2024 economic landscape, indicating a modest 1-2% growth rate for the upcoming year.

Key takeaways include:

Interest Rates and Economic Outlook: Despite recent adjustments to the Federal Reserve’s statement, interest rates are anticipated to remain elevated unless a significant downturn occurs.

Mortgage Rates and Home Prices: Over two-thirds of outstanding mortgages carry rates below 4%, fueling a continuous rise in home prices and  driving rental housing demand as a cost-effective alternative.

Multifamily Sector: Modest increases in rent and occupancy are expected, reflecting cautious optimism.

Cap Rates and Investment Risks: Experts highlighted a noteworthy surge in cap rates as property values have decreased, with projections indicating a continued increase into 2024. This trend is underscored by a narrowing spread between cap rates and 10-year Treasury bonds, currently approaching 1% instead of the desired 3% to adequately reward investors for real estate investment risks.

Property Value Dynamics: An intricate relationship between rent, cap rates, and property values is emerging. Failure of rents to drive up cap rates may result in a potential decrease in property values, estimated at 10-15% in some markets.

Short-Term Loans and Supply Dynamics:  The impending maturity of short-term loans with floating rates in 2024 and 2025 was identified as a significant factor that could plague the multifamily sector. This creates buying opportunities for external investors equipped with capital, and a subsequent increase in supply is expected as some property owners, faced with variable rate debt reaching maturity, contemplate selling.

The event shed light on the complex interplay between economic trends and the real estate market, offering nuanced insights into challenges and opportunities for multifamily investors in the coming year. A full recording of the conference is available online courtesy of Chapman University.

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