Inflation, Interest Rates Cited As Top Issues For Residential And Commercial Real Estate


The global chair of The Counselors of Real Estate says inflation and interest rates are this year’s leading concerns of his 1,000-member organization.

At the National Association of Real Estate Editors conference at The Westin Buckhead in Atlanta, GA, William McCarthy said everyone they talk to wants to know about inflation and interest rates. The Counselors of Real Estate is an international consortium of commercial property advisors which has posted a top ten list of issues affecting real estate for 11 years.

“Inflation dictates interest rates. Interest rates dictate inflation,” McCarthy said.

McCarthy told the crowd they have some questions about the current interest rate narrative.

“Interest rates are supposed to go up a little bit more, level, and then come down. Is that kind of the narrative that you have been reading about? But, who knows if that is going to be true or not? And what happens in the interim if interest rates continue to go up and/or if they level off?” McCarthy said.

McCarthy said he does not expect to see anything like 2008, when homeowners were upside down in their mortgages, but he did point out that the economic health of modern society is based on consumption.

“The generation before me was, ‘What can I afford?’ The current generation is, ‘What can we make the payments on?'” McCarthy said. “Credit has been very easy of late and that is something that does concern us because you always wonder, the people in debt themselves, have they used their home like a cash machine?”

The second biggest concern McCarthy cited is geopolitical risk.

“Geopolitical uncertainty means COVID, it means the war in the Ukraine, it means China and everything that entails. A year ago, we had never heard nuclear and armageddon put together in a sentence, for one, so this uncertainty is probably the biggest end risk to anything anybody is trying to plan long term or short term because the world is very, very tight now. What happens in one region impacts another,” McCarthy said.

McCarthy said geopolitical risks affect real estate as investors are averse to the uncertainty they bring.

The third issue impacting real estate is hybrid work.

McCarthy said as more people work from home, that begs the question of what will happen to office spaces.

A panel discussion was held at the conference on Tuesday afternoon to discuss converting office spaces into housing. Caitlin Walter of the National Multifamily Housing Council is scheduled to speak on Thursday about why 4.3 million more apartments are needed in the United States.

Other issues McCarthy cited were supply chain disruption, energy, labor shortage strain, the Great Housing Imbalance, regulatory uncertainty, cybersecurity interruptions, and environmental requirements.

Eileen McEleney Woods, president of the National Association of Real Estate Editors, told The Mortgage Note in an interview that the annual conference is a networking opportunity but they also offer journalists and industry experts in attendance insight into topical issues and skills they can use.

“We have panels on social justice in the newsroom and in commercial real estate. We have an Excel workshop we’ve been running,” McEleney Woods said. “There’s a lot of business to be done, but everyone is approachable, which I really, really like, and you find that you have a lot of people who come back year after year because of the insight they gained from the panels, and the discussions, and the leads they get from the networking, but they also build lasting friendships and sources.”

Challenges for homebuilders, creating affordable multifamily projects, the shifting rental market, and the economic forecast for 2023 are among the topics chosen for this year’s conference, which will wrap up on Friday.

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