Recorded at the end of 2022, this update works through the headlines that had commercial real estate on edge: interest rates still climbing, the questions swirling around Blackstone, and a steady drumbeat of housing-crash predictions. Andrew separates the noise from the parts operators actually had to underwrite.
It holds up as a time capsule of the rate-shock moment, and as a window into how VAC frames market fear: not as a reason to freeze, but as the backdrop that resets pricing and surfaces the next basis.
Transcript
hey my name is Andrew Dunn this is the state of the market report for December 2022. we're going to dive into Blackstone 69 billion dollar rate having withdrawal issues Jerome Powell giving us an update on his future interest rate hikes inflation and the current labor market and then the U.S housing recession and is there going to be a crash occurring and when will that occur Blackstone 69 billion dollar Reit is having withdrawal issues why is this occurring investor psychology is getting pretty weird out there right now in the current state of the market because these investors are seeing headlines of economic recessions U.S housing crisis people from China are pulling out their money because they're having their own internal country issues but what do I see as an investor listening to all these different big read CEOs I'm seeing that there's not a real fundamental issue in the commercial real estate market it's just the way these funds are structured if I have ten thousand dollars and I invested in blackstone's 69 billion dollar rate I have different positions of liquidity Blackstone has the right with my ten thousand dollars to take one thousand dollars to buy this property three thousand dollars to buy that property and then they're waiting for the rest of my money to be deployed so some of my money is liquid but other pieces of my money are already committed to properties properties are E-liquid asset classes and you can't pull your money out even if you are a Blackstone so these are the issues that they're trying to limit is it's just a perception of investor psychology there's not really a true fundamental issue in this withdrawal crisis the interest rate Godfather Jerome Powell who has been controlling all of our Lives if you're in the real estate market came out on November 30th in a New York conference stating his perception of future rate hikes inflation and the labor market and how these different factors are going to influence how he sees the federal fund rate going with the Federal Open Market Committee he's now showing a taper ring process and he's now seeing inflation has been cracked from its eight nine percent highs now going into six percent he still sees strong demand in the labor market showing strong resistance against a recession in regards to the labor market because people are still getting hired jobs are still being created they're just being redistributed throughout our economy because unemployment is still remaining strong at 3.7 percent so my prediction for future interest rate hikes is a 50-bip increase in December two more 25 basis point increases in q1 of next year in 2023 and then they're going to stagnate the interest rate hikes and they're going to see how inflation reacts but his main driver that he honed in on was inflation and his inflation Target of two percent if there is not a downward Trend to inflation of two percent he will continue to raise rates until he hits his Target is the U.S in a housing recession and is it heading for an economic crash first you have to look at the facts during covid-19 we have pen up Demand with low interest rates and low mortgage rates giving people more affordability for so much house than ever in U.S history now that the federal government has been raising interest rates and causing mortgage rates to increase it's driven that affordability down dramatically for average consumers before you had everybody competing for the same type of house now there's barely anybody that can afford these houses in today's market with these interest rate payments because they've gone up 50 percent year over year inventory has gone up dramatically in the U.S housing market we've seen a strong increase actually the fastest increase in mortgage rates in U.S history since we started tracking interest rates and it's caused an economic stall in regards to buying activity also for sellers they don't want to throw their houses on the market because of the interest rates they have locked in at sub four percent if they were to go out and sell their home and capture the equity that they've gained and their homes over the last couple years they can't find a comparable product as a replacement for the equity that they have in their home because the payment is so high due to these high mortgage rates now mortgage rates have been drastically increased over the past year as we've seen and everybody's seen in this market but you're starting to see them tapered down with predictability and stability from the FED in the previous comment to Jerome Powell if Jerome Powell provides stability and a predictable increase in rates the market can adapt to this stability that's what real estate is people invest in real estate because it's stable and predictable High appreciation of 20 percent downward depreciation of five or ten percent that's not the value of real estate real estate has intrinsic value to people with growing population and growing economic demand in certain markets if it has this underlying intrinsic value it's going to be susceptible to various interest rate increases because those are more volatile causing various pricing pressure on the housing market inventory climbing people are still actively looking to buy homes sellers aren't drastically flooding the market I just think you're returning to a stabilized Market that we haven't been accustomed to over this last Bull Run Cycle that has been occurring between 2012 to 2015 depending on your Market I don't think there's going to be a real estate housing crash I think there's going to be a correction of 10 to 15 percent that's my state of the market update for December of 2022 if you have read some articles that have changed your opinion on the real estate market or just the overall investment markets please drop them in the comments below if you want to understand more about commercial real estate and commercial real estate investing check out these videos here