Arbor Realty CEO: Urban rentals have returned to pre-pandemic levels

Ivan Kaufman, Chairman & CEO of Arbor Realty Trust, joins Yahoo Finance to explain the increased demand for both renting and owning real estate.

Video Transcript

BRIAN CHEUNG: Now, of course, we're watching economic data. And we did get a report this morning confirming that home prices are continuing to rocket up. The S&P CoreLogic Case-Shiller National Home Price Index showed home prices rising 18.6% annually in June. That's a faster rate than May. And get this, it's a pace that hasn't been seen since 1987.

So for more on this, let's bring in Arbor Realty Trust CEO and founder Ivan Kaufman, who's an expert on multifamily and commercial real estate. And Ivan, I guess I just want to ask, are you seeing the similar trends in your corner of the world, especially as the reopening does continue on one hand, but Delta maybe presents a downside risk on the other hand?

IVAN KAUFMAN: We are seeing price appreciation not just in housing. We're seeing it in multifamily rents. Every single sector is very, very strong. The single-family market for rent is just as strong as well. So you have all the different aspects of housing being strong for sale, for rent, whether it be multifamily or single family.

SEANA SMITH: Ivan, that's interesting. You mentioned the fact that both the rental market and the for-sale market are strong at the same time. That doesn't necessarily always happen in tandem like that. I guess, what do you attribute this to? And what does that signal, I guess, for the housing market going forward?

IVAN KAUFMAN: Yeah, you're absolutely right. Sometimes when housing's strong, rental's soft and vice versa. You're seeing it on every single cylinder with respect to housing. I think there's a lot of pent-up demand. Clearly, you've heard on the housing side, there's just not enough supply. And with the pandemic having happened, everybody wanted to go out and buy a home and move out to the suburbs.

What we're surprised about is how strong the urban areas still are and that we're seeing rents return in these different areas to prepandemic levels and now experiencing tremendous growth. I think people have some pent-up savings, and they're using it. And they're really watching their housing and making sure that their accommodations are good, especially if they're not going into the office.

BRIAN CHEUNG: Ivan, obviously, not all markets are the same. And based off of the report that we got this morning, home prices rising 29.3% in Phoenix, 27% in San Diego. These are eye-popping numbers. Where are the regions of the country where you're seeing particular heat in the multifamily space?

IVAN KAUFMAN: I mean, areas that you just mentioned, absolutely correct. You're seeing it in areas like Austin, Texas. You're seeing it in Miami. Phoenix is a leading area. Tremendous movement towards the Southeast. So that's where a lot of the strength is with almost double-digit increases in rental rates.

What we're really surprised about, even in the urban areas like New York, you're seeing a return to almost post-pandemic rental rates. So I think there's strength all around, with the greatest level of strength in the Southeast and areas like Texas and in Arizona.

SEANA SMITH: Ivan, are you at all surprised that we haven't seen at least a little bit of a slowdown, particularly in some of those urban areas that you were just mentioning, with the rise of Delta? Because we're hearing more and more today, Google just announcing that employees aren't going back to the office until January. So it might keep people, you would think, from renting in some of those urban areas, but that doesn't seem to be the case.

IVAN KAUFMAN: It's not the case. I think a lot of that softness had to do with schools not being open. I mean, take New York City. If the schools aren't open, people aren't renting, the restaurants are closed, all the supporting stores are closed. So the school open was probably one of the biggest factors in these urban areas, so people will go back and start renting.

And let's face it, people want to get back to the city. They enjoy the city, specifically areas like New York City that I consider to be the greatest city in the world. So I think there was a timeout. That timeout's coming to an end.

There's a transition period of time. But make no mistake about it, people are running back to the city, and they're renting apartments, and they're paying. And there's a shortage of apartments, and they're fighting for rentals right now.

BRIAN CHEUNG: Well, Ivan, let's talk a little bit more about the greatest city in the world. I'm here in Downtown Brooklyn, and there are buildings that were under construction that had started prepandemic. They paused during the midst of it. They're continuing to build them now.

We know that in New York City in particular, supply is always an issue. But across the country, we know that supply chains have also been an issue not just in terms of getting materials, but also the labor to build these up. So what do you see as the pressures on the housing market in multifamily from some of those supply and labor constraints?

IVAN KAUFMAN: Well, getting back to what you initially said, everybody was concerned with absorption. And there was a probably six-month period of time when things froze and stood still, but absorption is quite strong even in the urban areas like Brooklyn and like Manhattan. And absorption is well ahead of the time.

Now, with respect to the supply chain being interrupted, I think that there are certain deliveries that were going to occur perhaps this year. They're going to be pushed to next year. So the supply chain is going to cause a little bit of delay.

You'll have the absorption, but the demand is going to be very, very strong. So expect, with the demand being strong, absorption being strong, and delivery being a little slower, that you'll see rents stay firm.

BRIAN CHEUNG: All right, Ivan Kaufman, Arbor Realty Trust CEO and founder. Thanks again for joining Yahoo Finance this afternoon.