The Federal Reserve hiked federal interest rates by 0.25 basis points at its July meeting, and while the bank may no longer be forecasting a recession, the increased rates may cause unintended implications on the housing market. Partner Justin Barry spoke with several media publications on the potential implications of such.
“With each round of rate hikes, the Fed puts increasing pressure on multifamily properties with floating-rate loans or maturing fixed-rate loans. Many owners are attempting to pass along the increased financial burdens to tenants by increasing rental rates, provided that demand in a particular submarket supports higher rental rates,” Barry said.
“The other byproduct of increased rates is a rising number of defaults of financial covenants in multifamily loans — in particular, failure to meet certain debt service coverage ratios or debt yield requirements. For the most part, we have seen forbearance from lenders in exercising remedies for these types of defaults; but the million-dollar question remains: how long will lenders ride along before calling these loans?”
Read more in HousingWire, Mortgage Professional America, Scotsman Guide, REALTOR Magazine, DS News, and The MReport.
