At Countrywide, we’re often asked, “Why build now? What about interest rates? Inflation? A looming recession?” Despite these concerns, we see significant opportunity in the market, even amidst challenging factors. Let’s address some of the most common housing market myths and explain how Countrywide is navigating today’s real estate landscape.
Myth #1: High Interest Rates Make Multifamily Project Financing Impossible
It’s true that rising interest rates are challenging for single-family homebuyers, with mortgage applications down over 60% year-over-year. However, this doesn’t mean multifamily developers like Countrywide are stalling.
How This Impacts Countrywide:
In one of our recent projects, a lender increased our interest rate from 5.5% to 6.0%, which added $500,000 to our budget. Despite this, we moved forward confidently. Why?
As both the project’s developer and general contractor, Countrywide is uniquely positioned to manage market shifts and uncover savings. By leveraging our vertically integrated model—including investment, development, construction, and property management—we generated over $1 million in construction cost savings, more than offsetting the increased interest expense.
Our integrated structure ensures financial stability and flexibility on every project, even during periods of fluctuating interest rates.
Myth #2: Inflation & Material Costs Are Historically High
There’s a common assumption that “it must cost a fortune to build right now.” However, material and labor costs have significantly decreased from their pandemic-era peaks.
- Lumber: Down 70%
- Aluminum: Down 40%
- Steel: Down 20%
How This Impacts Countrywide:
At Countrywide, our general contracting team has observed material and labor costs plateauing, creating more favorable conditions for multifamily development. As homebuilders slow down, subcontractors and suppliers are competing for work, driving labor costs down across multiple trades. This balances out higher costs in other areas, allowing us to maintain cost-effective projects without sacrificing quality.
Myth #3: Apartments Are Being Overbuilt
It’s a common misconception that apartments are being overbuilt. However, research from Freddie Mac paints a very different picture:
- 3.8 million housing units are currently short of demand.
- The shortfall is projected to grow to 6.5 million units by 2030.
- For every 1% increase in mortgage rates, 5 million fewer households can afford to buy a home.
How This Impacts Countrywide:
At Countrywide, we conduct rigorous market analysis to ensure our projects align with demand. With rising interest rates pricing prospective homebuyers out of the market, the demand for multifamily housing is stronger than ever. Our development vetting process ensures strong financial fundamentals for every project we undertake.
Myth #4: Multifamily is in Trouble Because Rent Prices Are Dropping
While some markets have seen rent declines, according to RealPage data, only eight of 150 U.S. metro areas experienced year-over-year decreases in rent as of March 2023. Rent growth nationwide remains strong, even if it has cooled compared to historic highs in 2021 and 2022.
How This Impacts Countrywide:
Across most of the markets where Countrywide operates, rental rates continue to grow at or above the conservative 3% we model in our project proformas. These numbers align with our financial projections and ensure stable returns for our investors.
Myth #5: With a Recession Imminent, This Is a Bad Time to Develop Real Estate
Some developers are pausing projects due to market uncertainty, leading to fewer new multifamily buildings being delivered over the next 18–24 months. However, this opens opportunities for developers ready to take action.
How This Impacts Countrywide:
At Countrywide, we’re moving forward with confidence. We plan to start 20 new projects in 2023, taking advantage of the lull in new supply. These projects will open their doors and begin collecting rents by the time paused developments resume, positioning us to meet growing demand from renters who remain priced out of homeownership due to high mortgage rates.
The Countrywide Advantage
At Countrywide, our vertically integrated approach allows us to navigate today’s real estate challenges with agility. By managing all aspects of our projects—investment, development, construction, and property management—we ensure cost efficiency, high-quality results, and strong financial performance across every phase.
Important Disclaimer
No Offer of Securities: This material is for informational purposes only and should not be considered an offer to sell or a solicitation to buy an interest in any investment. Such offers are made only through a confidential Private Placement Memorandum. Access to information about investments with Countrywide is limited to accredited investors under the Securities Act of 1933 or those with the financial sophistication to evaluate the risks and merits of such investments. Investment outcomes vary, and past success does not guarantee future results. Historical return details are available upon request.
