October 4, 2024

For Immediate Release

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Investors, Partners, and Friends,

Last month, the Fed finally cut interest rates by 50 basis points—marking its first cut after an unprecedented 11-time rate hike spree. Real estate investors had hoped this moment would reverse the negative effects of high borrowing costs, improve valuations, and stimulate transactions. Yet, things haven’t played out as anticipated. Since the rate cut, borrowing costs have actually increased—5-year and 10-year Treasury yields have risen by ~30bps and ~33bps, respectively, as of October 4, 2024. So, what happened?

• Growing geopolitical tensions in the Middle East: The escalating conflict between Iran and Israel, coupled with potential U.S. involvement in strikes on Iranian oil facilities, has spooked markets. This has led to fears of higher oil prices and concerns over broader economic impacts (White House).

• Over-anticipated rate cut trajectory: Powell’s comments at the NABE suggested the 50bps cut shouldn’t be interpreted as a precursor to aggressive future cuts, causing investors to scale back their expectations for future rate reductions (CNBC).

• Strong U.S. jobs report: S. job growth surged in September, adding 254,000 jobs—the largest increase in six months—while the unemployment rate fell to 4.1%. This stronger-than-expected report eased concerns about economic weakness but reduced the chances of further aggressive rate cuts by the Fed. Traders now estimate only an 8% chance of a 50bps rate cut at the November meeting, down from 31% earlier (Reuters)​.

Now, where does this leave us as real estate investors?

It’s easy to hope for a quick turnaround after a rate cut, but as investors, we must remain realistic. Risks—economic, geopolitical, and multifamily-specific—are still very much present. Record levels of supply growth, moderating rent trends, and inflationary pressures on expenses remain significant concerns.

‍Yet, history teaches us that the best opportunities often emerge from uncertainty. If a market feels risk-free, it’s often a sign of excessive exuberance—just as we saw before the 2008 crisis and prior to the recent rate hikes, when optimism drove prices to unsustainable levels.

Think back to 2008. The market was in shambles—real estate valuations plummeted, financing was scarce, and confidence was low. But those who had the foresight and conviction to invest during that period, when the economy was still in recovery, were rewarded handsomely. They understood that real estate is cyclical, and recovery was inevitable.

At Rockview Capital, we are embracing that same long-term perspective. Prices are down substantially today, creating opportunities to acquire assets at significant discounts. We see the strong fundamentals driving demand in our core markets—Phoenix, Salt Lake City, Las Vegas, and Dallas—and we know that patience, focus, and disciplined execution will position us to outperform.

‍Now is the time to act as supply growth moderates, operations stabilize, and inflationary pressures begin to normalize. As always, success in investing comes from looking past the present challenges and focusing on the opportunities that arise from dislocation. This is our strategy, and we are prepared to act decisively.

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Until next time,

Rockview Capital LLC