How the Bond Market Impacts Real Estate

The bond market is a critical component of the global financial system, where entities like governments, municipalities, and corporations raise funds by issuing debt securities to investors. While it may appear to operate distinctly from the real estate market, there is a closely knit relationship between the two. Understanding this interaction is key to recognizing not only the current economic landscape but also to forecasting potential shifts in real estate values and interest rates.

Understanding Interest Rate Movements

The bond market's influence extends greatly into real estate through interest rates. Bond yields, which move inversely to bond prices, often presage changes in mortgage rates. This correlation between bond yields and mortgage rates is fundamental; as investors demand higher yields on bonds, lenders adjust mortgage rates accordingly to remain competitive. This dynamic can directly influence the real estate market by altering the affordability of loans for borrowers, potentially dampening market activity when rates are high.

Furthermore, an uptrend in bond yields translates into steeper borrowing costs. This scenario affects not only prospective homeowners but also real estate investors and developers who rely on financing for purchasing and building projects. Higher mortgage rates can slow down the real estate market by compressing leveraged yields and impacting valuations.

Real Estate Investment Trusts (REITs) Under the Microscope

Real Estate Investment Trusts (REITs) offer a clear lens through which the effects of bond market fluctuations can be observed. As entities that finance real estate through investor shares, REITs are sensitive to changes in the bond market due to their reliance on financing and their payout structure to investors. When bond yields are high, the fixed income they offer can become more appealing than the variable dividends of REITs, potentially detracting from REIT investments. Conversely, in environments of low bond yields, REITs might appear more attractive due to their higher yield potential.

Navigating Inflation's Terrain

Inflation significantly affects both the bond and real estate markets by influencing interest rates and bond yields. Inflation typically leads to higher bond yields as investors look for returns that offset the reduced purchasing power of future payments. This effect can create a challenging environment for real estate. On one hand, inflation can push property values and rents higher. On the other hand, it can increase borrowing costs through higher mortgage rates, complicating the impact on real estate investments.

Inflation affects the bond and real estate markets by influencing interest rates and yields.

Liquidity and Sentiment: Market Dynamics

The liquidity and sentiment in the bond market can also sway investment trends in real estate indirectly. The overall liquidity of the bond market often reflects broader economic conditions and investor confidence, which in turn influences real estate investment decisions. During times of economic uncertainty or volatility, the perceived stability of bonds might temporarily outweigh the potential gains from real estate investments, directing capital flows accordingly.

The Influence of Government Interventions

Government policies can have a profound impact on both the bond and real estate markets. Central bank policies, such as interest rate adjustments or quantitative easing, can drastically alter the landscape for both bonds and real estate. Investment strategies require recalibration when these two interacting markets evolve in response to policy changes.

Strategic Partnership for Institutional Investors in Multifamily Syndication

The intricate relationship between the bond market and real estate requires constant vigilance and strategic foresight from investors. Understanding the dynamics at play allows for better positioning in response to economic indicators and bond market movements, allowing informed decision-making for optimizing real estate portfolio performance in any economic climate.

At CF Capital, our expertise in multifamily investment provides institutional investors with a strategic vehicle for diversifying into real estate. This approach allows for significant leverage of resources, granting access to high-value, multi-family real estate opportunities that may otherwise be beyond reach. By focusing on pooling the financial strength and strategic acumen of institutional investors, we unlock exclusive investment prospects. This ensures our partners are perfectly positioned to benefit from real estate's potential in any economic climate. Our commitment lies in equipping institutional investors with the insights, opportunities, and strategic foresight required to navigate the complex relationship between the bond and real estate markets, aiming towards long-term financial success.

So, get in touch with us today and leverage our expertise and market presence to harness the strategic advantages necessary for your long-term financial objectives in the real estate market.

How the Bond Market Impacts Real Estate

Understanding Interest Rate Movements

Real Estate Investment Trusts (REITs) Under the Microscope

Navigating Inflation's Terrain

Recession vs Depression: Navigate Market Volatility

When it comes to investing, understanding the differences between a recession and a depression is helpful nuance for navigating market volatility, mitigating risk and capturing opportunities. An economic downturn can cause concern and confusion among even the most skilled investors, so having strategies in place to minimize risk and capitalize on opportunities becomes crucial. The comparison of recession vs depression, two terms that describe periods of economic decline, has distinct characteristics and impacts on the market. By grasping these differences and implementing strategies to navigate market volatility, investors can make informed decisions and protect their assets. Let’s go over the essential differences between recessions and depressions and provide strategies to navigate market volatility.

Recession vs Depression: What’s the Difference?

Recession: A Moderate Economic Downturn

A recession is a significant decline in economic activity lasting for a relatively short period. It is characterized by a slowdown in economic growth, a contraction in business activity, and an increase in unemployment rates. During a recession, consumer spending tends to decrease, so business revenue and profit margins decrease, too.

Recessions can be caused by various factors such as high-interest rates, reduced consumer spending, natural disasters, or financial market crashes. One significant historical example is the 2007-2008 recession, which was primarily triggered by the bursting of the housing bubble and subsequent financial crisis. However, it is important to note that every recession has its unique combination of factors and causes.

Key indicators of a recession include declining GDP (Gross Domestic Product) for two consecutive quarters, a rise in the unemployment rate, and a decline in consumer confidence. Recessions can be caused by factors such as a significant shift in supply demand dynamics, employment market volatility, geopolitical instability, inflation, trade disruptions, and financial market crashes.

During a recession, investors face unique challenges and considerations. The reduced consumer demand during this period can directly impact businesses and subsequently affect the stock markets. Therefore, it is crucial for investors to closely monitor the financial health and performance of the companies they have invested in or are considering investing in. Stock markets often experience increased volatility, with prices fluctuating based on investors' perceptions of the overall health of the economy.

To mitigate risks during a recession:

Diversify your investments and focus on defensive options.
Research and select investments with strong financials and a history of resilience.
Maintain a long-term perspective and avoid reacting to short-term market fluctuations.
Stay informed and monitor the financial health and performance of your investments.
Keep a cash reserve to provide a buffer in case of emergencies or investment opportunities.

Depression: A Severe and Prolonged Economic Downturn

A depression is a more severe and prolonged economic downturn . While there is no universally agreed-upon definition of a depression, it is generally characterized by a significant decline in economic output, widespread unemployment, and a lasting impact on various aspects of the economy. characterized by a significant decline in economic output, prolonged periods of reduced economic activity, a significant decline in GDP, widespread unemployment, and a lasting impact on various aspects of the economy. Unlike a recession, a depression extends beyond a few quarters and can last for several years or even a decade.

Depressions typically have a cascading effect on the economy. Job losses lead to reduced consumer spending, which dampens business activity, leading to further job losses. The cycle perpetuates itself during the economic downturn and creates uncertainty, fear, and distrust in the overall economy.

Depressions are often accompanied by massive bankruptcies, widespread business closures, and financial crises. Stock markets can experience significant declines, causing widespread investor apprehension. Governments often intervene by implementing fiscal and monetary policies to stimulate economic growth and stabilize the financial system.

Investing during a depression can be challenging but here are a few tips:

Assess your risk tolerance and invest accordingly.
Diversify your portfolio across different asset classes.
Stay informed and adapt to changing market conditions.
Maintain a long-term perspective and avoid reacting to short-term fluctuations.
Evaluate investment opportunities selectively.

*Multifamily syndication investors saw stable rental income during the economic downturn.*

Navigating Market Volatility through Multifamily Syndication

Though we are not in a recession or depression at the time of this writing, it is always important to protect your assets against market instability. At CF Capital, we operate with a long-term viewpoint at all times, and recognize that we operate in a cyclical investment class that goes through various phases of the market cycle: expansion, hyper supply, recession, and recovery. In the event of a potential downturn, multifamily syndication can be an effective strategy to achieve risk mitigation and wealth protection. By pooling capital from multiple investors to acquire and manage larger real estate properties, such as apartment communities, investors can gain access to steady cash flow, diversification, professional management, tangible assets, tax benefits, passive income, and potential for appreciation.

During periods of economic turbulence, multifamily syndication can offer a safe haven for elite investors looking to protect their assets and generate stable returns. The consistent rental income generated by these properties can offset the impact of economic downturns, and investors can benefit from the expertise of professionals who manage the properties on their behalf.

There have been historical instances where multifamily investing during a recession or depression has proven to be a wise investment strategy. One example is the Great Recession of 2008. During this time, while the housing market experienced a significant downturn, the multifamily real estate sector remained resilient.

Investors who had allocated their capital into multifamily syndications found that the consistent rental income from residents helped offset the impact of the economic downturn. Additionally, the demand for rental properties increased as individuals and families affected by foreclosures or financial hardships turned to renting instead of owning homes.

Explore Multifamily Syndication Opportunities with CF Capital

Understanding the differences between a recession vs depression and having strategies to navigate market volatility is crucial for investors. By investing in multifamily syndication, individuals can protect their assets during economic downturns.

At CF Capital, we specialize in multifamily investments and leverage our expertise in acquisitions and management to deliver superior risk-adjusted returns. Our primary focus is on prioritizing the preservation and growth of our investors' capital. We are committed to protecting your financial security and building lasting partnerships. With our track record and dedication, we strive to be a reliable option for investors seeking more exposure to the multifamily real estate market.

Take the next step and explore the multifamily syndication opportunities with CF Capital today.

Elevate Your Invesment Portfolio with this infographic outlining 9 key benefits of investing in multifamily real estate

Effects of Inflation: Strategies for Wealth Preservation

While inflation has generally become a regular occurrence in the context of economic growth, elevated or unexpected inflation can present obstacles for prudent wealth preservation and economic stability. To safeguard and augment wealth over time, it is essential to understand the causes and ramifications of inflation. By proactively implementing effective strategies, investors can mitigate the impact of inflation and secure their financial well-being. Through a combination of foresight and ongoing vigilance, individuals can take control of their financial future—protecting their investments from the eroding effects of inflation and ensuring long-term prosperity.

Causes of Inflation

Various factors, such as imbalances in supply and demand, supply shocks, and expectations of future price increases, can drive inflation.

Imbalance in Supply and Demand

When demand for goods and services outpaces available supplies, inflation occurs. In such cases, producers and businesses may raise prices in response to the heightened demand, which can lead to inflationary pressures. On the other side of this equation, when the overall money supply increases and productivity remains generally equal, inflation tends to follow as well. In recent years, we’ve seen money supply increase exponentially, leading to very substantial inflation.

Supply Shocks

Disruptions in supplies can also trigger inflation. For example, a sudden decrease in global energy supplies due to geopolitical tensions or natural disasters can lead to a spike in energy prices. This increase in production costs can ripple through the economy, contributing to inflation.

Following Russia's invasion of Ukraine, international sanctions restricted countries in the "collective West" from purchasing energy supplies directly from Russia. While Russia still sells energy to some countries, the restriction on their exports impacted global energy markets and led to increased prices. This tightening of the market contributed to inflation.

Expectations of Inflation

Expectations of future price increases can also influence inflation. When people anticipate prices will rise in the future, they may demand higher wages to protect their purchasing power. In turn, businesses and producers may respond by raising prices to cover the increased labor costs. This dynamic of wage-price spirals can contribute to inflationary pressure.

*Inflation erodes money's value, diminishing purchasing power and challenging the maintenance of a consistent standard of living.*

The Effects of Inflation on Wealth Preservation

Reduced Purchasing Power

Inflation decreases the value of money over time, leading to a reduction in purchasing power. This erosion of purchasing power can gradually diminish the value of your wealth. As a result, it becomes more challenging to maintain the same standard of living because the same amount of money will buy fewer goods and services.

Erosion of Investment Returns

Inflation can erode the real returns on your investments. When the inflation rate exceeds the returns on your investments, it diminishes the purchasing power of your investment gains. For example, let's say you earn a 5% return on your investments, but inflation is at 3%. In this case, your real return is only 2%. This example illustrates that even when inflation is at a lower rate than your return, it still reduces the purchasing power of your investment gains.

Negative Impact on Fixed Income Investments

Fixed-income investments such as bonds and fixed-interest securities have a predetermined interest rate. In an inflationary environment, the purchasing power of the fixed income generated by fixed-income investments such as bonds and fixed-interest securities decreases—meaning the buying power of the interest income may not keep pace with the rising cost of goods and services. As a result, the real return on fixed-income investments may be lower, impacting your overall strategy for preserving wealth.

Real Estate Value Fluctuations

Inflation can have a dual impact on real estate. On one hand, property prices may increase in an inflationary environment, leading to appreciation in the value of your real estate holdings. On the other hand, the real value of the asset may decrease if the rate of inflation outpaces the growth in property prices. This can make it challenging to preserve and grow wealth through real estate investments. Inflation can also impact income and expenses that real estate properties generate, elevating both sides of the income statement.

Increased Cost of Living

Inflation leads to an increase in the cost of goods and services, which affects your cost of living. When prices rise, your day-to-day expenses will increase, impacting your ability to preserve wealth. The higher cost of housing, food, healthcare, and other necessities can eat into your savings and limit your wealth accumulation.

*Investing in multifamily real estate serves as an effective inflation hedge, leveraging historical property value appreciation*

Mitigating the Effects of Inflation

To mitigate the impact of inflation on wealth preservation, it is crucial to adopt various strategies, such as:

Diversification

Diversify your investment portfolio across different asset classes, such as equities, real estate, commodities, and fixed income. A diversified portfolio can help you spread risk and mitigate the potential negative impact of inflation on your overall wealth.

Inflation-Protected Securities

Consider investments in inflation-protected securities or bonds. These securities are designed to provide returns that keep pace with inflation, ensuring your purchasing power is preserved in an inflationary environment.

Real Estate Investments

Investing in real estate, specifically multifamily, can be an effective hedge against inflation. Historically, property values tend to rise with inflation. Furthermore, rents are marked to market on an every 12 month basis, taking inflationary effects into account on the income side of these investments for owners. By investing in this type of real estate, you can benefit from the appreciation of property values and protect your wealth from inflation.

Investing in multifamily real estate is beneficial for several reasons: stable cash flow from multiple rental units, economies of scale for cost-efficiency, diversification to spread risk, accessible financing opportunities, and the potential for property value appreciation over time.

Equity Investments

Equities have the potential to outpace inflation over the long term. Companies can raise prices for their products and services, generating higher revenues and deliver real returns which outpace inflation. However, it is essential to assess the risk profile of equity investments before making any decisions.

Regular Review and Adjustment

Review your investment strategy and make adjustments as needed to adapt to changing market conditions and inflationary pressures. Staying proactive and informed is crucial in preserving your wealth and ensuring its growth over time.

CF Captial Leveraging Real Estate as a Hedge Against Inflation

Inflation can have a significant impact on wealth preservation and growth. However, by implementing these strategies, you can navigate the challenges of inflation and ensure the preservation and growth of your wealth over time. At CF Capital, we focus on acquiring and operating multifamily assets that provide stable cash flow, capital appreciation, and a margin of safety. With our expertise in acquisitions and management, we prioritize capital preservation while delivering superior risk-adjusted returns. When you invest with CF Capital, you can navigate the complexities of inflation with confidence, knowing you have a trusted partner dedicated to optimizing your wealth preservation and growth strategies.

Elevate your investment portfolio with this infographic outlining 9 key benefits of investing in multifamily real estate. Download Here

From the Desk of CF Capital: January Investor Report

Hello Friends and Investors,

Happy New Year! As real estate investors, we are generally happy to see the calendar turn to 2024 after the very challenging and tumultuous year of 2023. While the change in the calendar is more a symbolic change and much of the uncertainty remains in the broader market, there seems to be a sentiment among market experts that this year will bring a renewed sense of clarity and stability in the overall commercial real estate market versus the opposite in the year in the rearview. For example, the Fed's recent "dovish" commentary introducing potentially 3 rate cuts in 2024 has enlivened investors for the potential of increased cash flow, improved financing dynamics and an overall de-icing in transaction velocity for the year. On the other hand, the 2024 election is now heating up and anyone with any form of a crystal ball to predict the state of the economy during such a time in the next year would be untrustworthy or a charlatan.

At CF Capital, one thing we can count on is family and each other. We appreciated the opportunity to spend more quality time with our families for the holidays and to celebrate our team's accomplishments in 2023. Here are a few photos of our team from our annual holiday dinner and with our families making memories during a very special time in our lives:

Bidding Farewell to Elevate Podcast

I come to you with a mix of emotions as I share some important news regarding our journey together on Elevate Podcast. After 4.5 incredible years and over 320 episodes with some of the world's most prolific investors, #1 NY Times Best-Selling Authors, Hall of Fame Athletes, Olympic Legends, world leaders in personal development, profoundly influential entrepreneurs, leaders, coaches and renowned economists, the time has come for me to bid farewell to this chapter of our podcasting adventure. Creating Elevate has been an extraordinary experience, and I am immensely grateful for the support, inspiration, and enthusiasm you've shared with me throughout this journey. Your engagement has fueled the growth of our like-minded community and has made every episode a meaningful conversation that transcended the digital airwaves. As I reflect on the countless conversations, insightful interviews, and shared moments of learning and growth, I am filled with a deep sense of gratitude for the impact this podcast has had on both myself and our community. The connections we've forged and the stories we've explored together will forever hold a special place in my heart.

While it's bittersweet to say goodbye to Elevate, I am excited to share that new creative endeavors are on the horizon. Although I can't reveal the details just yet, I am committed to bringing you content that continues to inspire, uplift, challenge and engage our community. I want to express my sincerest appreciation for you being a part of this incredible community. Your feedback, messages, and unwavering support have been the driving force behind Elevate's success, and I am genuinely excited to embark on a new chapter with you.

As we close this chapter together, I am encouraged that we are remaining connected and you'll be the first to know about upcoming projects. Thank you once again for being a part of the Elevate community. I look forward to the next adventure and continuing this incredible journey with you. In the meantime, our journey together with CF Capital is only just beginning, and many profound triumphs lie ahead of us as we conquer substantial goals in partnership.

Looking Ahead

As for 2024, we're expanding our team, forming new partnerships with investors and other strategic partners, growing our portfolio, protecting our partners' capital via capital events, and plugging into doing the hard things daily. Our focus remains in being your trusted real estate partner, which includes remaining plugged into the latest happenings in the market and reacting as necessary, yet also creating proactive opportunities through our expanding and extensive network.

If you're attending NMHC in San Diego at the end of this month, we'd love to meet with you, use the button below to schedule a meeting with us.

Meet with us at NMHC

If you are interested in being a part of our team or know someone who should be considered, please send your resume here.

If you are ready to discuss investing in our next project, schedule a call with us:

Schedule a Meeting with Tyler

Schedule a Meeting with Bryan

In Partnership,

Tyler & Bryan

PS. There's no higher compliment than you referring us to your friends, family, and colleagues. We'd be honored by the opportunity to become a part of their trusted networks. Share your experience investing with CF Capital & invite others to become an investor here.

From the Desk of CF Capital: December Investor Report

Hello Friends and Investors,

Excitement is in the air as the holiday season is upon us! As we navigate the ever evolving seas of the real estate market, we're grounded by the opportunity to take time with family and friends during this special time of year. There's so much to be thankful for. Simultaneously, we remain very active in optimizing our current portfolio during this volatile market and seeking new acquisitions during this window of opportunity to acquire high quality assets at a discount, while Santa gets his sleigh all loaded up. Let's dive into some updates and some of what's going on in our world.

November: A Transformational Month - Personally and Professionally

Members of our team had an incredibly productive and transformative November. Bryan and his wife Channing traveled to Peru during the week of Thanksgiving to hike the Inca Trail to Machu Picchu. For 4 days and 3 nights, they challenged themselves mentally and physically to explore one of the most remarkable places in the world, and the metaphoric transformation they experienced was infectious.

Tyler traveled to South Beach Miami to attend Bisnow's Ascent Retreat, which is the most exclusive commercial real estate community across the country, comprised of the top owners, developers, and investors under the age of 45(ish). With $4 trillion+ in AUM, 2.1 billion in square footage under ownership, & 600K+ in multifamily units owned, the Ascent community powers the entire CRE industry. This was a great event with some of the most respected CRE participants (institutional equity investors, lenders, debt and equity brokers, sponsors, developers, etc) across the nation (and included excursions with some of the most renowned experts on high performance) for Tyler represent CF Capital and to connect to new and existing strategic partners, discuss and identify collaboration opportunities in a casual environment. While the waters of the economic sea remain choppy, relationships forged and innovation identified through this type of event is to the benefit of our existing and future partners with folks like yourself.

Also, CF Capital was the “Featured Developer” at the 2023 KY CPA Commercial Real Estate Conference, where we discussed strategies, structures, tax strategies and case studies with leading CPAs across the state.

Separation Season

For many in the real estate industry, this time of year brings a slowdown in activity, yet for CF Capital we see it as "separation season," even without giving up the fun of the holidays. Separation from the previous version of each of our team members in a sense of personal growth (we believe that our collective success is a lagging indicator of our continued individual personal growth, after all) and separation from the competitive landscape in the sense of business development. Many others are taking their foot off the gas in many ways and taking extended time off during this time of the year, yet, for us, we're doubling down on finishing the year strong and setting up 2024 to be our best year yet. Of course we're still taking time to observe the holiday season with our loved ones, but instead of taking the entire season off, we're challenging ourselves to step up our commitments during this time of year.

How are we doing so? For starters, later this week we are conducting our annual offsite retreat for our leadership team. During this multiple day out of town retreat, we reflect on the success and opportunities for growth that we've encountered this year, refresh and discuss our SWOT analysis, go deep on what's working and not, and set goals in accordance with our Vivid Vision for the next year, and more. Since our inception, we remain committed to the Traction EOS comprehensive business management framework, and we're looking forward to "emptying the tank" of our minds to help create clarity, efficiency, inspiration and set the path for optimal execution in the next year. We certainly mix in a little fun and team bonding experiences, but this type of thinking is some of the hardest work we do, and inevitably it helps us really hit the ground running for the new year.

How else are we embracing this separation season? Another example is the doubling down on the growth of our team, even during this time of year (and during the phase of the market cycle, where many groups have implemented hiring freezes and are even downsizing). In addition to our normal course of daily business, we're actively recruiting two positions: Sr. Real Estate Analyst, and now Regional Property Manager. If you know someone who should be considered for either of these positions, please send us a resume with a cover letter to [email protected].

Real Estate Market Analysis & Outlook

The elephant in the room remains interest rates. Recently, we've seen treasuries decline significantly from mid October to the early part of December. Will this trend hold? Does this tell us that the bond market is projecting a "hard landing" in 2024 after all? How will the Fed respond to a recession during an election year? In the words of Nate Bargatze, nobody knows. (By the way, if you missed that skit on SNL, it’s definitely worth 5 minutes!)

Beyond interest rates, many multifamily markets across the sunbelt and western US continue to see very meaningful rent declines, and growing vacancy with record new deliveries. The midwest and northeast have been more stable (while our markets in the midwest have been as steady and attractive as can be, especially during this time, further cementing the relevance of our investment thesis for these markets where we tend to be more insulated from booms and busts), with less prior significant expansion during the boom period of late 2020 to mid 2022 (the key word is "less" here, as historic liquidity and artificially low interest rates made some investors make some strange decisions in all markets). Investors who aggressively pursued assets at all time low cap-rates during 2021 who have maturing debt in this environment are looking at carnage in the face as they approach capital events, leading to some opportunistic scenarios.

These factors, and continued inflation, eating into profit margin for operators all over the country, will heavily influence the condition of the market into this new year. Well capitalized operators and investors will likely be the beneficiaries of some very attractive opportunities as a result. Stay tuned, and stay ready.

In conclusion, we'd like to wish you and yours a fantastic and memorable holiday season. We challenge you to join our separation season challenge, and at the same time, enjoy the magic of this wonderful time of the year. As always, don't hesitate to reach out to us if you'd like to discuss the market, your goals, and any other questions you might have for us. We're here to help you, and in partnership, we can and will go far together.

Season's Greetings,

Will the Housing Market Crash? Insights for Investors

A market crash in the housing sector would affect the entire economy, reducing consumer spending and negatively impacting investor confidence, leading to economic uncertainty and volatility. Against the landscape of recently soaring home prices and continuing uncertainty, this blog aims to provide insights and analysis for investors, as we examine the potential for a housing market crash. By understanding the underlying factors and trends influencing the market, investors can make informed decisions to navigate through these uncertain times and safeguard their investments.

The Current State of the Housing Market Crash

Since the pandemic and the historic response from Congress and the Central Bank, the US housing market has experienced a surge in activity and values. This dynamic can be attributed to a combination of factors, including record-low mortgage rates and high demand in conjunction with very low supply, and the continuing trend of lower new construction deliveries than ongoing buyer demand, putting substantial upward pressure on home prices across the country. There are concerns about the sustainability of this rapid growth and the stability of the market moving forward.

The recent historically rapid interest rate increase induced by the Federal Reserve, juxtaposed with record-low inventory levels, has led to sustained elevation in home prices, yet now those prices are resulting in significant increases in homeownership costs. These increases, along with significant inflation impacting the cost of living for all Americans, makes it challenging for potential buyers to afford homeownership. Moreover, the cost of construction continues to rise, suggesting inventory levels are unlikely to change significantly in the near future.

Given these circumstances, some analysts question whether the current growth in the housing market is sustainable in the long run. While the current conditions favor sellers, there are early signs of a market correction (some markets are already seeing longer days on market for listed homes in comparison to prior quarters, and there are examples of sale price declines in certain markets) or even the potential of a market crash, depending on the health of the consumer moving forward, along with the stability of the job market. It is important for both homeowners and investors to carefully assess the market and consider alternative options to safeguard against risks.

Factors Affecting the Housing Market

The US housing market is affected by a range of factors, including the COVID-19 pandemic, affordability, regional-specific circumstances, interest rates, job market, and inflation.

The pandemic has had a significant impact on the housing market, leading to changes in consumer behavior, including increased demand for housing in suburbs and rural areas. At the same time, the pandemic also created challenges for potential buyers in terms of affordability.

Regional-specific factors such as zoning laws and land availability also impact the housing market. For example, areas with limited land availability may experience a surge in demand and prices, which can lead to increased risks of a housing bubble.

Interest rates are another critical factor affecting the housing market. Low-interest rates can lead to increased demand for housing, while high-interest rates can lead to decreased demand, impacting home prices. Economics 101 reminds us that higher demand with the same or declining supply will equal higher prices.

The job market is also important to consider when assessing the housing market. A weak job market can lead to lower demand for housing, whereas a strong job market can increase demand. While the job market remains generally robust and resilient, some analysts have concerns with where it’s heading due to certain substantial industries being significantly negatively impacted by current economic circumstances.

Finally, consumers’ ability to stay afloat amidst inflation is another factor that can impact the housing market. Inflation can lead to a rise in prices, including housing prices and other costs of homeownership, making it more difficult for consumers to afford homeownership.

Is a Housing Market Crash Likely?

While a market crash is a possibility, the more likely outcome in the short term is a market correction. The market has historically shown resilience and economic factors like strong demand, low inventory, low-interest rates (in the broader context of history, by comparison), and a non-linear economy suggest gradual adjustments instead of a severe crash. Understanding the real estate market cycle, which includes expansion, hyper-supply, recession, recovery, etc., can help in predicting future patterns and forming realistic expectations. In summary, a slowdown is more probable than a market crash, with gradual adjustments expected in the housing market.

*Multifamily real estate has historically been a stable form of investment.*

The Reliability of Multifamily Investment

In these uncertain market conditions, multifamily investment remains a strong option for investors seeking stability and consistent cash flow throughout market cycles. Multifamily properties, such as apartment complexes, have a history of showing resilience even during market downturns, making it an attractive alternative to the unpredictable housing market. Sometimes, the factors that cause tremors in the single-family residential market are driving forces that improve fundamentals within multifamily real estate. For example, when a homebuyer is priced out of the single-family market due to interest rates, rising home values, lack of inventory, inflation, or a host of other factors, that individual typically seeks an apartment to rent for shelter. After all, human beings always need a place to live, no matter the economic circumstance.

While single-family primary residential housing demand may wane, multifamily property investors can ensure consistent rental income streams while working to reduce vacancy rates. Additionally, the diversification of a multifamily investment portfolio further increases stability and benefits in times of market disruption.

Multifamily investments, when thoroughly vetted and properly evaluated, have a proven track record for success. Investors who have invested in multifamily properties through a rigorous vetting process have found stable and consistent cash flows while waiting for appreciation. The advantageous real estate sector offers a hedge against market downturns, mitigating any potential losses.

Multifamily Properties: A Stable Alternative to the Uncertain Housing Market

Determining whether the housing market will crash or continue to grow is a complex endeavor. The current state of the housing market indicates significant price appreciation and increased challenges, meaning it’s an uncertain investment risk. To navigate housing market conditions, investors need the knowledge to make informed decisions. A comprehensive investment strategy in multifamily property can provide a stable investment opportunity by mitigating potential risks while enabling stable income streams. It is crucial to work with experienced and accredited real estate investment professionals, like CF Capital, for optimal results. Multifamily investments offer an attractive alternative to the sometimes erratic (and usually speculative/unpredictable) housing market, instilling confidence and stability for investors for the long haul.

CF Capital specializes in multifamily property syndication, offering a range of investment opportunities for interested investors. Our platform offers equity investments in top-performing multifamily properties across the Midwest and Southeast, and our team handles all the management, construction and maintenance on your behalf while giving you exposure to the benefits of ownership (ie. Passive income, tax benefits, equity appreciation, etc.) without all the headaches. If you are interested in learning more about multifamily property investment and how it can benefit your investment portfolio, contact CF Capital.

From the Desk of CF Capital: November Investor Report

Hello Friends and Investors,

We hope you and yours are enjoying the season of autumn as we welcome the month of November. You may have found yourself in the hundreds of millions of Americans that welcomed this month with a significant cold snap, firmly cementing the transition to the fall season. The kids in our lives (and their parents, for that matter!) broke out their winter coats, hats and gloves and still had a blast for Halloween, nevertheless! We hope you did too.

In this month's investor report, we're excited to share what we've been up to and what we're seeing in the market in an effort to help our valued partners make more sense of the complexity of the current and projected marketplace.

Strengthening Partnerships in the Real Estate Capital of the World

First, in October, it was great to spend time in NYC, where we had the privilege of spending valuable time with some of CF Capital's important strategic partners (some of the most elite minds in our industry, nationwide), discussing the state of the market and strengthening our relationships for future opportunistic pursuits. We are excited about the opportunities that are emerging through these best in class collaborations and look forward to sharing more details in the coming months, to your benefit.

Market Updates: Residential Market Dynamics, Midwest Stability, War in the Middle East and Interest Rates

Multifamily real estate continues to be a resilient and attractive investment in today's ever-changing and in many cases turbulent economic landscape. Demand for quality apartments remains robust, driven by factors such as high single-family mortgage interest rates, rising costs of home ownership, steady population growth, and select job market expansion. As the chart below shows, the gap between homeownership and multifamily rents are at historic levels. This spread driven by increased mortgage rates coupled with the overall housing shortage are keeping demand for rental property strong.

CF Capital and our partners are actively invested in Kentucky and Indiana and are further pursuing growth in the Major MSAs of each state in addition to Cincinnati, OH, and in Nashville, TN. Depending on who you speak to, these markets would be considered the Midwest, while in many circles Kentucky would be considered the Southeast, and usually Tennessee is firmly considered Southeast. Regardless, the characteristics of most of the markets that we target (with the exception of Nashville), tend to follow Midwest trendlines. The Midwest, historically known for steady and attractive growth, remains strong and steady while some other regions of the country are seeing rental rate declines. The Midwest's healthy overall economic conditions, population stability, stable population growth, and continued rent and job growth make it a compelling destination for investment in otherwise volatile macroeconomic conditions. Recent reports of our target markets like Louisville, Indianapolis, and Cincinnati leading the nation in rent growth and salary expansion for 2023 highlights the region's position for long-term value, compelling us to continue to pursue attractive value-add multifamily opportunities to share with you.

Unless you live somewhere deep under a rock, you are well aware that in October, a brutal war in the Middle East broke out from the attack on innocent civilians in Israel. Our hearts go out to the many families impacted, and the many families that are being impacted in the conflict since the initial attack. Geopolitical concerns are on high alert across the world, impacting capital markets and anticipated market conditions. There are no certainties of how things will play out, but investors are on high alert as governments play the high-stakes chess game of incredibly complex circumstances that no doubt impact financial markets, investor sentiment, and the flow of capital.

Last week, the FOMC met and left interest rates unchanged, making it the second meeting in a row where the central bank has skipped a rate hike. Capital markets remain very volatile, influencing decisions related to capitalization, growth targets, and the broader investment landscape. Uncertainty remains, but a pause gives players like us more clarity and stability in the real estate market today for investors positioning for transactions. The recent jobs report showed a softening employment market, which caused treasuries to dip meaningfully as the market anticipates an overall weakening economy, signaling perhaps future dovish central bank behavior. While interest rates are not directly correlated to cap rates (ie. multifamily asset valuations), they are absolutely sensitive to them, and overall cash flow is certainly impacted. Time will show how the capital markets continue to make sense of the state of the market, after a dizzying last 20 or so months of interest rate hikes working their way through the system. We continue to believe this time of uncertainty remains a window of opportunity to secure attractive deals at discounts, while being properly capitalized for longer term hold periods.

Looking Towards 2024

As we look forward to 2024, we are closely following the significant wave of multifamily maturities coming due, comprising hundreds of millions of dollars worth of quality assets in our target markets that may be forced to transact at adjusted market level prices. The story of how this landscape will evolve, including strategies for recapitalization, refinancing, or asset disposition at potentially reduced valuations due to increased interest rates and cap rate expansion, is still unfolding. Time will tell, and flexibility remains our north star as we navigate these ever changin market dynamics.

Thank you for being an integral part of our community. We look forward to keeping you updated on the latest developments in the real estate market and opportunities to grow your wealth through real estate at CF Capital. If you have any questions, comments, or suggestions, please feel free to reach out to us.

Wishing you a prosperous November!

Your Trusted Real Estate Partners,

Tyler & Bryan

From the Desk of CF Capital: September Investor Report

Hello Friends and Investors,

We hope you and yours are doing well! Meanwhile, the fast and furious year of 2023 continues to roll on, with no sense of slowing down. The volatile news cycle, relatively turbulent economy, a presidential election cycle that's starting to take center stage and continued uncertainty in capital markets are creating some opportunities in our space and presenting a certain level of risk investors need to be aware of and appropriately mitigate. At CF Capital, we continue to plug away at relentlessly addressing current issues and remaining adaptable enough to capture attractive opportunities that are presenting themselves in light of current events. All the while, we continue to invest in our team members and find time to make special memories with our families.

Despite the headwinds in the current market, we are pleased to announce the recent closing of Elevate at Nulu, a 263 Unit Class B Value Add Investment in Louisville, KY in the dynamic submarket of Nulu! We are very appreciative of our partners for their trust and confidence in our team as we embark upon this new venture together. The current market dynamics created conditions for a very attractive investment at a meaningfully discounted price. We were very pleased to secure financing at a fixed rate for 5 years at 6.06% with Fannie Mae, a very attractive rate considering the current interest rate environment. Now the real work starts where we begin to execute the business plan. For investors who would still like to participate in this deal yet weren't able to get in before closing, there are a few remaining slots available for you. Reach out to us to inquire further; note that we would anticipate this door to be closed rather quickly, or within the next couple of weeks.

Aside from our everyday business pursuits, in August, Tyler and his family took a trip to one of their favorite places in the world in Northwest Montana. They checked off a goal off their list of summiting a mountain with the twins (even if it was via gondola ride!). They enjoyed hiking, biking and boating in the great Montana outdoors, and visited beautiful Glacier National Park twice, a place very special to their hearts. Bryan and his family closed out the summer over Labor Day weekend at Douglas Lake, TN having fun on the water boating, fishing, and spending time with extended family members. While the reach and responsibility of CF Capital continues to expand, our founders continue to remain committed to living a life of adventure and fun! We're thankful for our team's support while we recharge and retool from time to time to come back fully rearing with energy and enthusiasm prepared to solve problems and create value for our partners.

Morgan Wimberg recently celebrated her 1 year anniversary working with CF Capital as our Asset Management Associate. We are so proud of Morgan and her continued tenacity to help us optimize all of our investments through the execution of our property business plans and maximize NOI. To celebrate, we threw axes and reflected on all of her accomplishments of the last 12 months. She's just getting started, and we are very appreciative of the excellent work Morgan remains committed to doing on behalf of all of our investors! Our team is growing, and we would invite you to stay tuned as we're going to be announcing two new positions in the near future. A+ players only, of course!

As for what we're seeing in the market in terms of new opportunities, time will tell. Having just closed on the acquisition of Elevate at Nulu, we're focused on beginning the execution of its business plan to create some meaningful momentum in the deal. Our team will be beginning unit and exterior renovations immediately. We continue to renovate units (garnering rent premiums well above initial proformas, all the while) and optimize the financial performance of the rest of our properties as well. As new acquisition opportunities cross our plate, we continue to evaluate and will pursue opportunities that provide an asymmetrical risk/reward ratio, especially while this apparent "window of opportunity" remains where many buyers are inactive, and sellers are willing to sell at a discount.

Here's to wishing you and yours a happy and prosperous beginning to the Fall season! Don't hesitate to reach out to discuss your real estate investment objectives, catch up, or ask any questions.

In Partnership,

Tyler & Bryan

From the Desk of CF Capital: March Investor Report

Hello Friends and Investors,

I hope you're doing well and ready to kick off spring time! All-around happenings remain productive for CF Capital as we navigate a hyper-active environment in the broader economy. It's certainly an important time to be informed of the many cross winds that are blowing, but also a great time to check in to understand how your mindset is being conditioned by the inputs you're allowing in. Our team with CF Capital is completely dialed in to understand the broader trends to anticipate and strategize around within our current and growing portfolio, and we remain positively focused on healthy growth amidst a time when many seem to be focusing on solely negative conditions.

In early February, we attended the annual NMHC Conference in Las Vegas, and met with the industry's best and brightest to strategize in 2023 and beyond growth strategies, as well as contingency plans for navigating uncertain times in the multifamily space. Across a couple days, we met with 40+ strategic partners, brokers and debt providers and walked away with optimism, strengthened relationships, and many new investment opportunities to evaluate.

Mid February, we began our "State of the Investment" Webinars series for all active deals in our portfolio, to share with our current investors where we are relative to our plan and projections. We received overwhelmingly positive feedback from investors about this communication tool, and hearing directly from us on the details of how the business plan is performing, and how that impacts their investment with us. We're encouraged to continue to strengthen our relationship with our valued investors through this medium, as well as best in class communications and execution.

We're continuing our hyper focused approach on portfolio management, and in particular leading our team in the standard of outperforming industry standards on collections, leasing, and renewals. While in Q4 we experienced somewhat of a slowdown in new leasing (which isn't abnormal, due to seasonality), we're very pleased with a substantial uptick in traffic in Q1. Beyond that, our teams at each asset have been shining in particular on collections (averaging over 95% across the portfolio) and renewals (averaging 10% across the portfolio), along with very positive trends on a month over month basis. These fundamentals remain our hyper focus, in addition to attracting and retaining the right talent on our sites (we just hired 3 new staff members across the portfolio) and pushing the ball forward on major capital expenditure projects (exterior projects including parking lots, electrical conversions, amenity conversions and ongoing interior unit renovations). Needless to say, our team has been working hard to deliver for our investors.

On the acquisitions front, our pipeline is growing and we're evaluating 12-16 deals that meet our acquisition criteria every month. We've got a couple deals right now that we're targeting closely, and are patiently aggressive towards securing our next opportunity for your consideration. Conventional wisdom in our space at the moment remains that the second half of 2023 will be highly compelling with more forced sellers than at any time over the past several years. We will absolutely keep you informed as this develops. For our acquisitions team, we're planning to hire an ambitious, high upside professional with character and energy to help us grow the CF Capital portfolio across the region in the very near future. A job posting will be coming soon, but if you are or know anyone who would be interested to discuss this opportunity, please reach out or make an introduction. This will be a life changing opportunity for the right talented individual.

This month, we're traveling out west once more to attend the Best Ever Conference for Commercial Real Estate Investors in Salt Lake City, UT. In addition to strengthening our current strategic partnerships, we're looking forward to expanding our network as opportunities in this next cycle begin to unfold. Tyler will be speaking on "Enhancing Your ROI by Elevating Communities Together," a concept that's near and dear to our hearts and that has been a separator for CF Capital. If you'll be attending the conference, please let us know and we'd love to make plans to get together in person.

In Partnership,
Tyler & Bryan

PS. If you'll be in or around Louisville in late March, we'd love to invite you to attend our next event: The 2023 Real Estate Investment Landscape Moderated Panel & Event sponsored by LDG Development. Register for the event.