When Walker & Dunlop in-house panelists previously appeared on the Walker Webcast, they were asked by CEO Willy Walker where they might put $100 million if they had it to spend. Ivy Zelman, CEO of Walker & Dunlop’s Zelman & Associates indicated that her funds would be directed to flip and fixing aging housing stock. EVP of Research & Securities Kris Mikkelsen indicted he liked low-density development. As for Senior Managing Director, Capital Markets Aaron Appel, senior managing director, capital markets decided he’d put that fictional $100 million into Bitcoin.

Fast-forwarding six months to the recent May 4, 2022 Walker Webcast, Appel said he would still put that large amount of money into cryptocurrency, primarily because “Government currencies around the globe are under duress and I do think that at some point, Bitcoin will disconnect from being a hybrid growth asset in the NASDAQ and continue to be adopted.”

Meanwhile, Mikkelsen indicated his preference for core multifamily in the sunbelt region, while Zelman pointed out that fixer-uppers are still a good target for investment, with cash as king. While that might be counterintuitive because of inflation, “right now what we’re seeing is dislocation in equity markets,” and land constraint in certain regions. She noted that the “migration states” are experiencing a great deal of home price inflation, and her preference tends to be in more affordable areas, such as the Midwest and even inland California and Florida. Still, “We we’re seeing is so much liquidity pumped into the market, we need a pause and re-evaluation,” she remarked.

All three experts discussed inflation in great detail, especially in light of the Federal Reserve’s May 2022 Federal Open Market Committee meeting. The Fed announced on May 4, 2022 that it would raise the federal funds rate to between 0.75% and 1%, with more increases to come.

That inflationary pressure is being experienced in the housing market. From the development side, Zelman pointed out that costs are surging, as are land values; also driving up the price of land is demand from multiple types of developers, whether build-for-rent or for-sale builders. As a result, housing affordability continues to be an issue. “We’ll start to see household consolidation and multi-generational living again,” Zelman forecasted, adding that the dilemma is that buying and renting are both unaffordable. There is backlog that will be generated, as developers need to monetize their projects, she added, but much of that backlog “is in the tertiary markets, because that’s where the land values are most compelling,” she said.

Still, the demand for housing continues to be huge, especially among supply chain woes. Mikkelsen said that the conversation among housing developers has gone from how to double the pipeline to “how do I executive what I have in the ground right now, to how do I help my contractor figure out how to procure material, to how do I find off-site storage to warehouse inventory because the supply chains that were broken in November are more broken today.” He went on to say this, and other factors, could slow housing starts.

On another front, Appel said he is bullish on hospitality properties, which had taken a hit during the pandemic. However, as with many real estate sectors, there is bifurcation. “Resort properties around the U.S. have seen their EBITDAs double, if not triple, from 2019 to today, and there’s been tremendous capital market activity for them.” He added that loan pricing has also substantially decreased from previous years.

But infill hotels are a slightly different story. “We have a couple of select-service, about 3.5- or 4-star properties in New York that got killed during Omicron, but before that, they were doing well last fall,” Appel said.

Flipping the hospitality coin once again, Appel said business travelers are starting to resume again. He said he is bullish on hospitality assets, adding that capital markets remain selective on the specific hospitality types.

On-demand replays of the May 4, 2022 webcast are available by clicking here and through Walker & Dunlop’s Driven by Insight podcast series.