VRAI - The Interplay Between Cap Rates And Interest Rates

2024-06-15 00:01:00 ET

Summary

• The relationship between capitalization rates and interest rates is more nuanced than first meets the eye.
• While nominal interest rates have an impact on real estate values, they do not have the same effect on cap rates as do real interest rates.
• Rising interest rates have restricted available capital, exerting downward pressure on property values, but the relationship is not linear and is influenced by a multitude of factors.

The relationship between capitalization rates (cap rates) and interest rates is more nuanced than first meets the eye. Understanding their interplay is a cornerstone of real estate investment analysis. In this blog post, we dissect historical data, discuss current opportunities, and forecast real estate valuations for the second half of 2024....

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