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Chart of the week

Commercial real estate sentiment jumps in Q2

Are Fed rate cuts reinvigorating the U.S. housing market? This week’s chart highlights recently renewed confidence in the multifamily market.

September 27, 2019 | 2 minute read
  • The Fed’s accommodative shift amid an already-low interest rate environment appears to have begun reinvigorating the U.S. housing market.
  • This week produced strong new home sales data while new mortgage activity remains elevated for this time of year. Recent data in parts of the commercial real estate (CRE) market has shown similar strength. August housing starts and building permits came in well above expectations, and both numbers were driven by significant activity in the multifamily market.1
  • To this end, the National Association of Home Builders (NAHB) provided further evidence that activity within the multifamily market has recently jump-started.
  • The NAHB Multifamily Production Index (MPI), which is a broad measure of multifamily builder and developer confidence, jumped 40% in Q2 from a quarter earlier.2 In the same time frame, the Multifamily Vacancy Index declined 15%.2
  • It’s important to note among these statistics that the pace of price growth across the multifamily sector has slowed this year along with most other segments of the CRE market. However, today’s rate and employment environments should both provide a layer of support to this sector, as well as the broader CRE market, moving forward.

  • Bloomberg Finance, L.P., as of September 19, 2019.

  • National Association of Home Builders, http://bit.ly/2wmfpVO.

The chart of the week and any accompanying data is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The chart of the week is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such market commentary. The chart of the week should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the chart of the week or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.

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