[Project Story] Prestige Apartments* + Inflation, Rates, and Real Estate
With crazy inflation, fast rising interest rate, and worries about the economy, we’d like to share what we are seeing and hearing right now. There is an intriguing phenomenon.
Mortgage rate has risen from 3 ~ 4% to above 6% in just a few weeks. A $320,000 mortgage went from $1400 monthly payment to $1900! There is no way the housing market can remain at the crazy pace as recent as 2022 Q1. Real estate market is cooling down for sure. Rising rates, however, yielded some unexpected results.
It turns out the apartment market is scorching hot right now, because the 6%+ mortgage rate priced out a good number of would-be home buyers. Demand for apartments shot up. I have also heard anecdotes of past homeowners decided to sell their homes and rent for a while.
Despite the hot market for apartment rentals, apartment communities still need to compete to attract and retain quality renters. Rents have also be rising. I think it’s wise to offer a good product / provide better value as prices go up. Great minds think alike, therefore, renovation is quite popular amongst savvy apartment operators now. 😆
Here is an actual project we are working on:
A national apartment operator with presence in 13 states is renovating 7 communities in Nashville Tennessee, Tampa Florida, and Cummings Georgia. The goal is to renovate 256 units in 2022. The renovation is not a small one. They are replacing laminate countertops to quartz countertops. Granite used to be the preferred choice, but the younger generation likes quartz more. The light fixtures, cabinets, and flooring are also being updated.
Kira Home is supplying our client with the brushed nickel Inara Pendant Light for over the kitchen counter. We were chosen because we have an established track record of offering attractive, high end design at great prices, along with the best support.
The project is not without its challenges:
- Labor - Since COVID, labor has been in tight supply. Employee attendance has also been affected. Our client decided to take a very smart approach. They just renovate 2 ~ 3 apartments at a time as renters move out. That way, the labor of the maintenance workers are fully utilized, without incurring a lot of extra cost or putting too much strain on their employees for a prolonged period.
- Inventory - Keeping popular items in stock for the past 2 years has been a challenge. We actually nearly depleted our inventory a couple of times. But our client made sure to order ahead of time and have extra units around. We’ve since worked more closely with client and our factory on quantity estimates and a safe procurement schedule.
- Logistics - The Inara Pendant Lights are shipped to different locations via 3rd party shipper. Since it comes with a large piece of glass, some breakage is expected. We’ve all seen boxes being thrown around. We are providing replacement glasses free of charge. This is one of the many perks of establishing a Pro account with us!
Here are some photos from the project. We love seeing those type of photos! Big Thanks to Jeff for sending us the photos. They sure look nice!
The Inara pendant light is simple and modern that fit right in with the proposed interior design.
Last Thoughts on the Home / Real Estate Market
A lot of people are expecting home prices to drop. However, given that the US have underbuilt houses for more than 10 years (since the Great Recession in 2008), I don’t know how much home prices will drop. To be sure, asking prices are dropping, and number of completed transactions have slowed down quite a bit. Different localities will show different results. The immediate effect is most likely that supply will increase and stay on the market longer, and transaction volume will decrease. However, whether prices will drop significantly or not is anyone's guess. Personally, I think unless we head into a serious recession, home prices will not crash like post 2008.
Apartment rental market will remain hot for quite a long time. If you are thinking of renovating, we’d love to be part of your team! Let’s talk about how we can deliver results and save you money!
I love to learn about business news and how different industries work. If you can shed some light on anything interesting you are seeing, please drop me a line! I can be reached at Instagram @KiraHomeDecor.
All the best,
Owner | Kira Home
*Project name used is an alias to protect our customer's privacy.