Rising Rates and Changing Perceptions
Last quarter, we marveled at the economy's resilience despite nearly two years of Federal Reserve interest rate hikes. The good news is that this resilience continues, with inflation moderating, a robust job market, and GDP growth exceeding expectations. However, the bond market has been making waves, driving long-term yields higher for various reasons, including inflation concerns and investor risk appetite.
The result? Yields on 10-year Treasuries have shot up, as have yields on 30-year fixed-rate mortgages. The ongoing rise in mortgage rates, coupled with the fact that home prices continue to climb higher, is making an already challenging affordability backdrop even worse.
In affordable housing, higher mortgage rates have affected multifamily rental properties, as well as single family owner-occupied homes, meaning the cost to finance similar properties has significantly increased from just a year ago. This also comes at a time when affordable housing owners and developers are having to deal with other rising costs, such as property insurance.
Against this economic landscape, we remain steadfast in our belief that there is a compelling case for affordable housing debt to create social and financial impact at a time when the supply of affordable housing is low, and demand is high and growing.