LightBox recently wrote that a number of factors suggest that CRE professionals avoid overconfidence. Stifel investment banking firm Keefe, Bruyette & Woods (KBW) went further, believing the industry is headed for a hard landing.

But more specifically, each had something to say about multifamily. KBW frames the view investors and developers have had of the sector — one of the two unstoppable darlings of the pandemic period. "For the past 15-plus years, multifamily (i.e., the apartment sector) has been perceived as a safe haven asset class as it offers an inflation hedge and fulfills the essential need of housing," they said. "Alongside growing institutional allocations to CRE, frothy markets bolstered by low interest rates, and surging rental demand coming out of the pandemic, this sentiment caused multifamily valuations, transaction volumes, and construction pipelines to reach record highs in 2021 and through mid-2022."

The view is understandable in part because people have to live somewhere, so even when rents skyrocketed into 2022, what would people do? As KBW noted, between March 2019 and July 2022, average national cap rates for the category went from 5.54% to 4.63%, a drop that was roughly equal to a 20% change in value. Cap rate spreads also went from an historical 3.23% to 0.67% because people had come to assume that multifamily was a hedge against inflation and recession.