Interest rates are most certainly expected to go up further as the Fed tries to tame inflation, which will lead to higher mortgage rates in the future, Auerbach noted. Despite the challenges, this won’t be a repeat of the Great Recession, he asserted.
Read more: REIT investment touted amid housing shortage
“It is going to get worse,” he said. “We already know it’s getting worse even before we have the Fed raising its interest rates next month more than likely, which means that mortgage rates are going to go up even more. We have to understand this is a whole different environment than what happened in 2006 or the 2008, 2009 crash when you made $70,000 and wanted a $750,000 house – approved! Today, we don’t have that issue. We were spoiled for so long in a 0% interest rate environment in the world of what I call free money. Because we’re in a different environment home price appreciation has gone up.”
Given Armada’s focus, the company is benefiting even as the housing market reaches an inflection point, Auerbach acknowledged. “We have the only active residential REIT ETF that’s on the market, so our focus in on apartments, single-family rentals, manufactured housing and senior housing,” he said. “So, playing into all this craziness that’s in the housing market right now, from where we sit – topsy turvy or not – a resident or a tenant is going to do anything and everything in their power to let their spouse or their kids have a roof over their head every single night that they go to sleep. And if I can’t buy that affordable house, I’m going to go rent that house; if I can’t rent that house, I’m going to go rent that apartment; and if my landlord says my rent is going up to a certain amount I can’t afford, I’m going to pack my things and move my family to another apartment.”