Interest in real estate investing was already increasing before the recent historic rise in inflation – and it’s only growing stronger.

That’s understandable, given that historically, real estate has performed well in inflationary environments. Real estate investments also can help offset impacts of inflation, especially in the multifamily sector where rents often rise along with wages.

These factors are becoming apparent in today’s market, as well.

It’s key to remember that data also reveals certain property types perform better than others. For instance, apartment investments showed gains of .89 percent for every 1 percent increase in inflation between 1979 and 2021, according to an analysis by the Pension Real Estate Association.

That same study found an even greater relationship between property value and inflation. The value of apartment properties actually went up 1.06 percent for every 1 percent in inflation.

In addition to the inflationary impacts on the market, the U.S. is also experiencing a significant housing shortage and declining affordability.

The Wall Street Journal recently reported it’s the most unaffordable housing market in history. The most recent affordability index produced by the National Association of Realtors found buying a home today is the most unaffordable it’s been since 1989. It’s estimated 18 million households no longer can qualify for a mortgage because of higher rates.

Plus, there are still far fewer homes available than prospective buyers, despite challenges with affordability. The nonprofit Up for Growth estimates the U.S. is 3.8 million homes short of meeting housing needs.

Those factors have combined to create historic multifamily occupancy in many markets, as residents are choosing, or being compelled, to rent for longer than they typically might. Combine that with population influxes in some secondary, tertiary or smaller metro areas and it’s created among the most robust multifamily markets many communities have ever experienced.

That’s producing favorable returns for multifamily investors, who are seeing rents increase and occupancy swell.

Of course, it’s still key to work with a developer and property management team with an established record of success in markets that are strategically selected for long-term success.

Over the past 30 years, Redwood’s multifaceted development arm successfully completed over 133 development projects across eight states. This included overseeing the development, construction, debt placement, and leasing of the units up to stabilization with a 97 percent physical occupancy rate across the portfolio as of April, 2022.

A look at the Dow Jones Industrial Average finds its performance down to where it was at the end of 2020, while the S&P has fallen 9 percent this September alone. In contrast, Redwood’s portfolio is averaging a 10 percent increase in its valuation since the beginning of 2022.

In these volatile economic times, multifamily real estate investors will continue to benefit from high-quality assets within areas showing stable employment and steady, or even significant, income growth. A selective approach to site selection and design combined with a best-in-class management approach can help investors mitigate the effects of inflation felt elsewhere in their financial lives. To learn more about investing with Redwood, call 216.360.9441 or fill out a contact form.