Ryan Severino is the chief economist at JLL, a leading professional services firm that specializes in real estate and investment management. He manages the economics team and is responsible for global and regional economic research, analysis, and forecasting as well as property market forecasting. Catch up with Severino about what he’s monitoring for the multifamily sector in the coming year as well as his most recent TV binge.
MFE: What are the top risks for the economy as we head into 2022?
Severino: First and foremost is the pandemic. It is not over, and the risk posed by new variants or other complicating factors remains ever present. Until we are finally past the pandemic, it could impact the economy in unpredictable ways. While inflation should start to slow in 2022, it will remain elevated, increasing the risk that monetary policy could tighten too quickly, slowing the economy too much. That slowing wouldn’t happen right away because of the lag between raising interest rates and the impact on the real economy, but inflation in 2022 increases the risk of monetary policy headwinds in 2023 or 2024.
MFE: Will inflation get worse?
Severino: My expectation is that inflation will get worse (for a bit) before it gets better. The key time period should be Q2 2022 when year-over-year inflation is calculated against higher base prices from 2021. But until that juncture, inflation could pick up because monthly price increases remained relatively tepid until around March and April 2021 when vaccination enabled the release of pent-up demand from consumers. Don’t be surprised if inflation during Q1 2022 looks ugly.
MFE: What else are you keeping a close eye on in the multifamily sector?
Severino: The performance of newly developed properties, especially in markets with large pipelines. New properties often boast rents that relatively few can afford. Does the music stop at some point for properties in the pipeline? I worry far less about lower-quality properties because the demand pool is deeper and rents are relatively more affordable.
MFE: How will rising rates play out in the new year?
Severino: We remain mired in a housing shortage. Estimates vary, but it likely totals in the millions of housing units. Even with some potential slowing in relevant demographic variables in the years ahead, demand for housing should remain strong, even if supply starts to catch up. I expect another strong year from both asking and effective rent growth with demand exceeding supply and the national vacancy rate compressing further.
MFE: The nation has been seeing big rent hikes. How do you think this is going to play out in the new year?
Severino: We remain mired in a housing shortage. Estimates vary, but it likely totals in the millions of housing units. Even with some potential slowing in relevant demographic variables like the household formation rate and population growth in the years ahead, demand for housing should remain strong, even if supply starts to catch up. I expect another strong year from asking and effective rent growth with demand exceeding supply and the national vacancy rate compressing further.
MFE: What metros will you be watching in 2022?
Severino: I will be watching a lot of the metros that many claim have gained an outsized number of residents during the pandemic. How real are these figures? How durable are some of these moves? And if the pandemic abates, what then, especially for everyone racing to develop new apartment properties in these markets? Some people in some places have likely fallen in love with a fairy tale rather than a true story.
MFE: Your latest TV binge?
Severino: “The Sopranos.” My wife had never seen it (I know, I know), and I hadn’t seen it since it originally aired. We recently completed it so we could watch “The Many Saints of Newark” together. “The Sopranos” was filmed where I grew up (sometimes literally blocks away) so it was interesting seeing those places again.
MFE: New Year’s resolution?
Severino: Take more vacation days.