What happens to markets if rate cuts don't come this year?

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Baby boomers lag other generations in savings levels link

• Baby boomers saved an average of $4,060 in 2023, the lowest among all generations surveyed. Millennials led with an average savings of $9,300, followed by Gen Z and Gen X.

• Despite high interest rates and rising credit card debt, 64% of adults felt confident in their ability to meet financial goals in 2023. Over half of the adults saved as much as they wanted or more.

• Gen Z and millennials are more engaged with their financial strategies, reviewing savings plans weekly and seeking professional advice. However, debt, especially credit card debt for Gen Z, remains a significant barrier.

Q4 2023 U.S. Net Lease Investment Figures link

• Net-lease investment volume plummeted by 45% year-over-year in Q4 2023 to $8.3 billion, with the total commercial real estate investment volume also falling by 44% to $81.2 billion. For the full year, net-lease investment volume decreased by 51% from 2022 to $38 billion.

• The industrial & logistics sector increased its share of net-lease investment volume to 50% in Q4 2023, up from 43% in Q4 2022, while the retail sector's share rose to 28% from 25%. Conversely, the office sector's share dropped to 23% from 32%.

• The average net-lease cap rate rose by 60 basis points year-over-year in Q4 to 6.4%, driven by higher borrowing costs and economic uncertainty. CBRE forecasts that net-lease cap rates will start to stabilize in the second half of 2024.

Multifamily Construction Starts Plunge Nearly 36% in January link

• January saw multifamily construction starts fall to their lowest level since the pandemic began, marking a 35.6% month-over-month decline. This significant drop contributed to an overall 14.8% decrease in construction starts, with single-family starts experiencing a much smaller reduction.

• High financing costs, slowing rent price growth, and a backlog of projects under construction are creating headwinds for the multifamily segment. Despite December's strong performance, which was later revised up by 75,000 units, the sector is expected to face challenges.

• The rise in apartment vacancies is attributed not to a decrease in renters but to an oversupply from years of robust construction. This has led developers to pull back on new projects.

Investors are expecting rate cuts. But what happens to markets if they don't come this year? link

• Hot economic indicators in 2024 challenge the anticipation of Federal Reserve rate cuts. A robust economy with a 3.3% GDP increase, 353,000 new jobs in January, and a 3.1% inflation rate may keep interest rates high.

• Stocks might still perform well despite high interest rates, but bonds and real estate could face significant challenges. The S&P 500 is expected to yield strong returns, not because of potential Fed cuts, but due to the groundwork laid by previous Fed policies.

• The commercial real estate sector, especially office spaces, is under pressure from the Fed's high-rate environment. With a looming debt maturity wall, property owners face refinancing at higher rates and lower valuations, potentially leading to $1 trillion in losses in the office market.

Yardi predicts weak multifamily rental growth for 2024 link

• Multifamily rental prices remained flat in January 2024, with an average rent of $1,710, marking only a 0.5% increase from the previous year. This stagnation is attributed to the influx of new supply, dampening price growth.

• Approximately 540,000 new multifamily units are expected to be introduced in 2024, following the completion of 500,000 units in 2023. This surge is anticipated to peak in 2024, contributing to subdued rent growth.

• Despite the increase in supply, demand for rental housing remains robust, supported by strong job growth, a stable economy, and continued immigration. Affordable housing and build-to-rent sectors have shown consistent strength, with affordable housing starts in 2023 more than tripling the totals of 2013 and 2014