Citi Economists Predict 50-BP Rate Hike from Fed Next Month 

Citi Economists Predict 50-BP Rate Hike from Fed Next Month. Where it was originally thought there would be 3 interest rate increases in 2022, Citi economists now expect the Federal Reserve to make a more aggressive 50-basis-point hike in the federal funds target rate in March. The bank made its forecast after January’s consumer price index rose by an annualized 7.5%, up from a 7% gain in December. Wall Street economists have been expecting a quarter-point hike for March. As recently as Jan. 28, Citi called for five 25-bp rate hikes in 2022, starting next month. However, the fed funds futures market began pricing in a more likely chance of a half-point rate hike next month after the inflation report and hawkish comments from St. Louis Federal Reserve President James Bullard. Bullard told Bloomberg News he’d like to see a full 100-bp hike by July. We now expect the Fed to raise rates 50 bp in March followed by four 25-bp hikes in May, June, September and December. Let me know in the comments how you think this will affect the So Cal multifamily market.

The Pulse of the Market

Listing inventory continues to creep upward slowly. We’re starting to see fewer all-cash sales. But there are still a lot of transactions where the property is selling either at full price or selling over the initial asking price. So demand is still very strong and listings are being absorbed by investors quickly with the days on market still occurring between 15-45 days.

What to Expect:
Inventory should continue its slow and steady increase over the next couple of months. Buyers should continue to snap up deals quickly and competitive bidding should keep prices stable and/or increasing slightly. If interest rates increase too fast we might see some buyers exit the market. As long as rents keep increasing apartments will remain a solid investment.