What Inflation, Interest Rates and a Recession Mean for U.S. Real Estate: Goldman Sachs

  • Real estate is often touted as a reliable hedge against high inflation, but that may be changing.
  • Soaring prices, rising interest rates, and a potential recession are reshaping the US industry.
  • In a recent podcast, two Goldman Sachs real estate experts revealed where the benefits are for investors.

Real estate is often touted as a reliable hedge against inflation because landlords can raise rents and property prices tend to rise along with other prices.

Goldman Sachs subject matter experts Jeff Fine and Nora Creedon explained why that’s not always true in a recent episode of Goldman Sachs’ Exchange podcast. They detailed how inflation, rising interest rates, and a possible recession are changing the real estate industry, and highlighted where they believe the opportunities lie for investors.

Below are eight of Fine and Creedon’s best quotes, lightly edited for length and clarity.

1. Nora Creedon: “Real estate tends to have a low correlation with other investments you have. It tends to be less volatile than many other investments. It tends to have an income side. I think it should be part of the portfolio of

2. Jeff Fine: “With so much capital chasing investment, we haven’t seen a real reset in asset prices yet. I think it will come over time.” He told Creedon that it would reduce the availability of credit, reducing market liquidity and property values.)

3.NC: “Focus on real estate that has pricing power. Assets that are in huge demand from people who can afford to pay for those assets. or you can stay in it or stay in it.It’s a great office building in Main & Main.”

“It’s also a type of real estate that’s not competing with massive new supply. That intersection of strong demand and limited supply is where we really see pricing power that can offset inflation.”

4.NC: “There has never been a time in history when there has been this much inflation, whether it came in the form of higher interest rates or less available capital, without a significant tightening in fiscal conditions. It’s usually not real estate friendly.” Emphasized the “offset costs” of charging.)

5.NC: “Mortgage rates for buying a home have risen significantly in recent months, creating a real affordability crisis in the housing market.” Higher costs have helped landlords raise rents, he said, making the alternative option of owning a home unattractive or even unfeasible for some people. for the sake of

6.NC: “We are certainly finding areas of housing, including niche areas of housing such as student housing and age-restricted senior housing, where there is a great ability to increase rent over time. We think there are, and those are where we want to be in the next five to ten years.”

7. JF: “Our belief is that people are returning to work. There may be some changes in work patterns. There may be more flexibility built in. The industry may not care too much about face-to-face in offices, but we still believe in the office tenant market as a whole.”

8.JF: “This is a very interesting time that we are in. Sometimes, given the disruption that it can bring to the broader market, we don’t love them. We’ve talked about rising interest rates but as an investor, these are the moments you’ve been waiting for.This is when inefficiencies create opportunity.

read more: 6 reasons the U.S. housing market can absorb a series of corrections as prices fall sharply

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