For most of the past year, investment risk in the housing market has been focused on the for-sale segment. That was largely because the huge run-up in home prices during the pandemic led to a mentality of “what goes up must come down,” coupled with long memories of the housing bust in the late 2000s. But the data we’ve gotten over the past several months suggest that it's the rental part of the housing market that's setting up for a hard landing.
Declining rents in 2023 should be the base case at this point, with the only question now being how far they will drop? And while tenants will cheer this possibility, the worry is that it will destroy the pipeline of new supply for years to come.
