Is A Recession Coming? BFR Experts Are Divided And 'Everyone's So Nervous'

Six speakers at a Miami Beach real estate conference on Monday gave six different answers to the question: are we heading into a recession?

But one thing they could agree on: if a recession does strike, the single family built-for-rent market is unlikely to suffer all that much.

Rising rent is one of the many challenges facing consumers that signal “a potentially challenging 12 to 18 months,” according to Ryan Broderick, CEO of Darwin Homes, who was a panelist at IMN’s Single Family Rent Forum (East) on Monday at Loews Miami Beach Hotel.

“I think that there’s a lot weighing on the consumer today across many dimensions,” Broderick said. “There’s also an undercurrent today in the economy, and I think the data is lagged and we are in a recession or going to be in a recession in the near term.”

Doug Dale, co-founder of HomeRiver Group, reasoned there’s no recession yet, but it’s becoming more likely every day.

“I think whenever you think about recession you have to consider: what’s your view on inflation?” Dale said. “I think the Fed’s made it clear that, if inflation continues at the pace that it’s going, they’re going to raise rates, and at some point that might be a time where you move to a recession.”

‘What Else Could Be Going Wrong?’

Kevin Ortner, president and CEO of Renters Warehouse, agreed that because inflation hasn’t peaked, that will trigger the Fed to increase rates and push the economy into a slowdown. But the scarcity of single-family rentals should propel the sector forward.

“I think we are in for a recession. I don’t know when, if it’s next quarter or the quarter after that, but I think it’s coming,” Ortner said. “Listings are still at near-historic lows: 800,000 listings across the country. The average in the last 15 years is 2.6 million. … Our industry specifically, I’m very, very bullish on. The economy as a whole, I don’t know how much more it can handle.”

Recession or not, it’s certainly not an ideal time for the world and the average consumer, as Roofstock CEO and co-founder Gary Beasley sees it.

“We’re kind of in peak fear right now, interest rates being part of it, but when you think about where we are as a society … we’ve got spiking interest rates, we’ve got war in Ukraine, we’ve got the stock market approaching bear territory, monkeypox. I mean, what else could be going wrong?” Beasley said. “Everyone’s so nervous.”

And yet, Beasley said he foresees a normalization over the next six to 12 months, with home price appreciation rates dropping to single digits by the end of the year and inflation and supply chain issues looking less bad in a year or two.

“I’m an optimist generally by nature, but I also look at the data and I do think that we’re going to be in a place where, over the near to medium term, we’re going to have some rockiness in the housing market, for sure, but compared to everything else, it [BFR] still feels like pretty much a safe haven, compared to all the other asset classes,” Beasley said.

Beasley predicted a mild recession in 2023.

“I don’t think it’s going to be a major one, but again, a lot of things can happen,” Beasley said. “I think to land this plane on the aircraft carrier perfectly, it will be an amazing feat if we can do it without a recession.”

‘We’re Fine’

There’s no recession on the horizon, in CoreVest Finance CEO Beth O’Brien’s opinion.

“We’re still in a spot where the economy is doing really well,” O’Brien said. “Particularly this industry, despite everything that’s going on, is just doing incredibly, incredibly well. Even though there’s been some inflation pressures on cost and clearly some supply chain issues, rents are continuing to go up and the NOI [net operating income] increases are really supporting the whole industry.”

NewWestern CEO Stuart Denyer echoed that point, saying he believed the economy is safe for at least the next 12 months.

“There are 100 other things that could happen that could lead to something, but I’m a little bit bullish on this,” he said. “I think we’re fine.”