How are you viewing the deflationary forces at work?

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Preface: I'm no economist but find discussing macro currents very interesting as they relate directly or indirectly to multifamily investing (investing in general). 

With a tight labor market, low interest rates ,QE and an economy deep into one of the largest expansions in history we still see very little signs of inflation.

Technology and market disruptors are a major driving force of the deflation we've seen. A large percentage of the inflation in today's market actually comes from real estate and rising rents. Many operators are raising rents by at least 3% / yr with many trying to get 5%+ with value add strategies. Wage growth is finally around 3% after being stuck around 2% for the last decade but it's hardly on a tear. 

Until inflation (other than housing) picks up there will be resistance to raising rents in many (not all) markets.

Real estate in general is a massive and mature industry that has yet to see the kind of disruption that has occurred in many other industries. AirBnB,  Co-Working are definitely having an impact but is there a black swan out there not on our radar? 

As Jerome Powell testified before congress today it made me believe that at least the Fed believes that they can have as loose of a monetary policy as possible without causing significant inflation. The more important strategy from the Fed seems to be to keep the music playing as long as possible. 

How does all of this effect your near and long term strategy?

@Spencer Gray I like this kind of macro economic analysis and enjoy spending a lot of time looking at it. 

I've personally been very critical of apartment syndicators that base returns on near unprofitable deals that are based on raising rents by doing cosmetic upgrades to units. The interesting thing is that often they can get the rent increases whether they spend the money on upgrades or not. Which suggest there is just a structural lack of supply of affordable apartments.

That's what I see in my market. We barely put a vacant apartment up for rent and it is snagged up. And I keep good solid rentals but I don't do cosmetic upgrades as a general rule.

So this tells me rents will continue to rise until this problem is fixed somehow. I don't see any Black Swan which will stop it, inflation, deflation there will still be a lack of affordable basic homes. But I guess that's the definition of 'Black Swan' something we don't see coming :)

I am cautiously optimistic. I am still a buyer at the right price but I am also very conservative in my assumptions.

There is a lot of inventory in the pipeline in a lot of markets and very little in others where you would expect more so it will be interesting to see how things play out over the next few years.

I like to anticipate a correction and rising rates. l underwrite deals from the position of having to reduce rents and lease rates to complete and counting in increases to meet return on equity.

We are beholden to interest rates and as we experienced last fall a very small uptick can have quick and severe consequences all across the board.

With pressure on CAP rates for almost every asset type and class the commercial and multifamily markets are reminiscent of the housing bubble in 2008-2009.

It sure is a fascinating time and it will be very interesting to see how this whole thing unwinds as is inevitably will.