Part 7/9:
The capitalization rate—a vital metric determining property value—further complicates the current market dynamics. Higher rents appear favorable, allowing assets to retain inflated valuations, regardless of the underlying tenant situation. This creates a cycle of inflated housing prices, often making it economically unfeasible for working-class individuals to secure stable housing.
As construction loans mature, developers face significant refinancing challenges that could force many into precarious situations—either unable to obtain further loans or stuck with properties that aren’t generating adequate income.