You might have heard that inflation in the U.S. is soaring or “reaching a 40-year high” as the Wall Street Journal put it this past week. For what seems like the longest time, the biggest question floating around the market is when the Federal Reserve (or the Fed) will raise interest rates. For the past few years, the real estate market has enjoyed extremely low interest rates, leading to a tremendous increase in demand. With limited inventory and high demand, it is no surprise that housing prices are increasing at a two-digit rate.
As we entered into 2022, the Fed announced its plan to raise interest rates to tackle the inflation problem. With various reliable sources throwing out different numbers of how many times they think the Fed will raise the rates, it induces the looming panic among investors. Many believe that as the interest rate increases, the pool of potential buyers will decrease. This statement is not necessarily wrong because buyers’ monthly payments would increase with higher interest rates. It would quickly become unaffordable for many, while it also puts many others into the unqualified group for a mortgage. But don’t panic just yet!
AS AN EB-5 INVESTOR, HOW DOES THIS AFFECT YOU?
Typically as EB-5 investors, you put your money into a New Commercial Enterprise (or NCE). This NCE – which a USCIS-approved Regional Center manages, generally is in the form of an LLC, where you and other investors become limited partners. On behalf of all limited partners of this LLC, the NCE will lend out the money to real estate developers to finance their projects. In turn, once your two years conditional green card expires, you are eligible for a refund of your investment. Usually, in residential building projects, the developers will refund investors’ money through their profit from selling apartments.
DON’T PANIC! NYC REAL ESTATE INVESTMENTS ARE STILL HIGHLY PROFITABLE
Many analysts believe that what the real estate market is experiencing now is not a bubble. It will not cool down just because the Fed is now raising interest rates. The market is used to historically low rates, which explains all the big headlines on rate hikes. However, it is important to remember that there was a time when rates were higher than 2% just ten years ago. While the recent rate increase headlines have helped fuel homebuyer sentiment to plummet, the housing market has remained red hot.
According to Hessam Nadji, the CEO of Marcus & Millichap, the outlook for apartments is quite robust for 2022. As the house prices go outrageous high, apartments become the solution for buyers who want to own a place but cannot afford it. Furthermore, this is also good for investors who buy apartments and rent them out. Many consumers, as we have seen over the last five years, pre-pandemic, were choosing to be renters to have the flexibility and the lifestyle that they’ve enjoyed as renters. With all of these being said, the demand for apartments is still high, and we expect it to increase even more in the near future.
The increase in renters also means that rents continue to rise. In NYC, the average rent for two-bedroom units rose 49.9% from the previous year. In addition, Manhattan recently saw a surge of 23% in rents, nearing an all-time record just a few weeks ago. All of these trends show that the NYC real estate market, especially for apartments, is still very strong. The market’s vitality is on growth and will continue in the future.
As EB-5 investors, there is no need to panic seeing the Fed’s rate hike. With the market still going strong and all the trends showing a positive outlook, investors can trust that their investment is safe and refundable.
At ARCFE, our team consists of both EB-5 and real estate professionals. We ensure that our services and the projects we offer will always put the interests of our investors above anything else. Contact us today for a free consultation with our team members:
Headquarter (New York, USA)
P: +1 (212) 889-5333
E: info@arcfe.com
Indian Office
P: +91 98240 56909
E: akash@arcfe.com
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