Jaime Sturgis Discusses Fed Rate Cut Impact with Multi-Housing News

Native Realty CEO Jaime Sturgis shared his expertise on what the Federal Reserve’s half-point reduction of the benchmark interest rate will mean for the national multifamily sector in a Multi-Housing News article.

“Jaime Sturgis, CEO of Native Realty, expects the rate cut to bring relief on the refinance side of the market, as the 10-year Treasury has been dropping in anticipation of it. If the Fed were to come in with a larger-than-expected rate cut, the markets would react with a sharper reduction in the cost of capital, providing additional relief to those trying to refinance.

Sturgis observed that many multifamily transactions traded over the past few years have had very thin margins between the cost of capital and the in-place cap rate. Furthermore, “many investors were buying on these thin margins, assuming rental rates would continue to climb at year-over-year rates achieved through the pandemic,” he said. “We are now seeing a leveling in rental rates and some rents retreating, adding additional pressure on these assets.”

While rate cuts are needed, Sturgis strongly believes that for some assets that were bought with thin margins and reliance on continued rent growth, it could be too little too late. In some cases, the key might return to lenders.”

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