Navigating Market Challenges, Seeking a 'Soft Landing'

LOS ANGELES—More than 650 attendees convened in Los Angeles on Monday morning for the GlobeSt. Multifamily Fall Conference, eager to gain insights and forecasts from the opening keynote speaker, Hessam Nadji, the President and CEO of Marcus & Millichap. Nadji kicked off the event by emphasizing that “The market is open and active,” which he says marks a crucial distinction from the circumstances of 2008 and 2009.

He began his address by acknowledging what he referred to as the “declaration of war” made by the Federal Reserve. He questioned the necessity of inflicting pain, explaining that it primarily arose from missing the opportunity to alleviate financial conditions following the pandemic. Nadji noted that once that opportunity is missed, drastic measures become unavoidable, and the ongoing process reflects this. “It didn’t need to unfold this way but while it was a declaration of war, it isn’t a foreteller of doom.”

Addressing the current situation, he remarked, “Here we are, having to grapple with this issue.” He traced the origins of the problem back to the liquidity surge, which escalated in 2020 when decisive actions were taken, pumping stimulus into the economy. The substantial increase in liquidity became apparent, setting the stage for future challenges.

Nadji also cautioned that the effects of these actions might not immediately manifest in inflation numbers. He stressed the importance of understanding that, despite the challenges, home prices are not plummeting, and there is no quick fix available. He highlighted the notion of enduring higher rates and questioned the need for the Federal Reserve to maintain a restrictive stance, expressing doubt about its necessity.

Regarding market volatility, he added, “The market faces hurdles in its journey back to normalcy. There will not be fire sales and distressed sales everywhere.”

However, “once we settle at a certain level, that, in itself, will be cause for optimism,” he said. He believed that while further adjustments may be necessary, the tightening cycle is nearing its conclusion. When inflation concerns subside, he saw the potential for the Federal Reserve to ease its stance, allowing the market time to recalibrate, acknowledging that this process would be painful but necessary. He projected that there might be another year of headwinds in the capital market environment.

One reassuring aspect that Nadji highlighted was the remarkable resilience of the job market. He noted that, despite the challenges, the job market had remained strong, generating over 300,000 jobs in the previous month. He described this resiliency as pointing to a “soft landing” scenario, where the labor market is unlikely to experience a sharp decline with millions of layoffs. The employment sector, in his view, remained in excellent condition.

Check back with GlobeSt.com for more from the GlobeSt. Multifamily event.