A few years of higher for longer could be good for the economies’ soul. If the Fed lowers rates, it’ll recharge the buying frenzy and real estate inflation it should want to cool.

In the Midwest, rents are up about 40% just within the last few years.  The job market is strong.  Yes, stimulus money has largely been spent, but jobs are plentiful, so tenants can affordably pay the higher rent.  There aren’t any low hanging fruit deals anymore, but an entire generation of savvy home flippers can operate at the new level of prices given the increased rents (flip to rent).  So if home prices are up 60% from 5 years ago, rents are up 40%, the project still pencils out – even with debt. Over-leveraged apartment complexes will just change hands, and banks will absorb the losses. In fact, a re-trade of an apartment complex at lower multiples may actually lower rents by decreasing requisite Pro Forma rent bumps on return underwriting.

So higher rates will crowd out the investors and make way for those who actually want to buy and live in the homes.