Nuveen Real Estate Global CIO Carly Tripp joins Yahoo Finance Live to discuss the impact of inflation on real estate, the September CPI report, and the outlook for the housing market.

Video Transcript

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BRIAN SOZZI: A volatile housing market and climbing mortgage rates could be pushing more prospective buyers back into the rental market. Our next guest says, this makes it the perfect time to invest in residential areas of the commercial real estate market. Let's bring in Nuveen Real Estate Global Chief Investment Officer Carly Tripp Carly, good to see you this morning. So where should investors look in this backdrop?

CARLY TRIPP: You know, I think that with all the data coming out, we're looking at a moderated home price appreciation scenario. And I think especially with the chart you just showed and mortgage rates ending the week last reach above 7%, so even higher than that chart shows, that's just gonna put continued pressure on the ability to buy and sell a home. And so what that's gonna do is increase the demand for rental housing.

BRAD SMITH: Wow. OK, that's not good news for me, a renter. So with all of this in mind, on the existing home side, you've got this conundrum as well because people aren't necessarily jumping to list their homes or add that inventory to the market, knowing that there might not be prospective buyers out there right now because of the rising rate environment.

CARLY TRIPP: 100%. I mean, inventory levels-- keeping a cap on inventory levels is going to be the saving grace of the housing market, no doubt. So the data that we saw last week, the data that's coming out this week-- existing home sales, pending home sales, inventories, under-- units under construction, et cetera-- all of that is lining up and stacking up for an overall, again, like a tempering in the housing market.

But the numbers coming out don't really matter at this point, right? Who cares about August and September when October, again, mortgage rates increased up through 7%. And monthly mortgage payments are now above 60% increase, just from one year ago.

BRIAN SOZZI: Carly, when we do get the sense of that Fed pivot. How does that change how you put money to work?

CARLY TRIPP: A sense of a Fed pivot-- if they start to temper back their rate hikes, what happens, I think, is that the US is really, really strongly positioned right now to have a foothold in the global economy. So we took a much more hawkish stance on our central bank policy. And what that's resulted in is this currency destabilization across major markets throughout the world.

And I think given that the US is really able to export energy, we can supply our own food, we can supply our own manufacturing-- we are the second largest manufacturer globally-- that's setting up the United States to be well-positioned to come out of whatever cycle we are going to see over the next 12 months.

So as a real estate investor, I would definitely focus on the US. And I would focus on more noncyclical inflation-linked assets, such as housing, industrial, health care, related assets, et cetera.

BRAD SMITH: Is homebuilder confidence, from what you're tracking, is that starting to improve or show any signs of alleviation from the declines that we had seen? Because delivering a house fully at this point, given some of the logistics and supply-chain challenges, that has been cited, that's been noteworthy, and impacted that confidence.

CARLY TRIPP: Yeah, absolutely not. Absolutely not. I do not expect homebuilder confidence to come back any time soon. As you saw, it's plummeted. And it's expected to continue to plummet.

What that will result in for investors like us is an opportunity, actually, to scoop up some new inventory and master plan communities at, I think, prices that will be well-below what we could have seen last year.

BRAD SMITH: How long after the Fed sees what it needs to on the housing side and home ownership side, do you believe that it will take for actual rental prices to start to come down?

CARLY TRIPP: I think rental prices are going to start to come down. So if you just look at certain simplistic stats, right? Like home prices to wages. That index is well above a normalized mean. That is not a good indicator. I think that leads to a softening in rents.

Also, if you look at just inflation numbers, particularly core CPI, shelter accounts for 40%, so an increase in shelter costs. So there is gonna be a continued pressure to get those prices down, particularly in the rental market and the home market. But I would say that if you look across your rental options, single family rental, we're really seeing a lot of tempering in new starts and under construction versus multifamily, which is, you know, continuing to outdo historical numbers.

BRAD SMITH: Nuveen Real Estate Global Chief Investment Officer Carly Tripp, thanks so much for joining us this morning.

CARLY TRIPP: Thank you.