Rising interest rates drive demand for rental housing

Rising interest rates have had a significant impact on real estate this year, with higher home mortgage rates likely to shift demand toward rental housing.

The Federal Reserve has raised the target federal funds rate six times so far in 2022, in its effort to combat inflation, with the potential for another raise before year-end.

The rise in rates this year has resulted in downward pressures in the real estate markets, according to Doug McKnight, president and CIO at RREAF Holdings, in an interview with IREI. “Focusing on the housing market, building permits continue to decline, with single-family permits down 6.1 percent in October, while multifamily permits dropped by 1.2 percent,” said McKnight. “For building starts, similar results, with single family declining 3.6 percent and multifamily down 1.1 percent for October.”

McKnight noted that existing home sales in October fell for the ninth consecutive month, down 32 percent since January. “This data