The US real estate sector is being transformed by high inflation, rising rates, and the risk of a recession. 2 experts at Goldman Sachs explain how.

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Property values tend to rise alongside other prices, making real estate a good hedge against inflation.

On a recent episode of the Exchanges at Goldman Sachs podcast, Jeff Fine and Nora Creedon explained why that isn't always the case. The real estate industry is changing due to inflation, interest rates, and a potential recession.

Here are Fine and Creedon's 8 best quotes, lightly edited for length and clarity:

This is the first thing. Real estate isn't as correlated to other investments as you might think. It is less risky than other investments. Income is one of the aspects that it has. It needs to be in everyone's portfolio.

There are two There is so much capital that is chasing investments that there has not been a material reset in asset pricing. Over time, we believe it will come. Creedon had said that the Federal Reserve's interest-rate hikes would hurt credit availability and reduce market liquidity.

There are three. Property with pricing power is the focus. Assets that people want to pay for. They can either pay the rents in the multi- family community or at the hotel in the Main & Main building.

The type of real estate that isn't dealing with new supply is also mentioned. Pricing power that can offset inflation can be seen at the intersection of strong demand and limited supply.

There are four. "There's never been a time in history where you could have inflation like this and not have tighter financial conditions, whether that comes in the form of higher rates or less capital availability." It's not usually friendly to realestate. She highlighted the "offsetting costs" to charging higher prices, such as having to pay higher wages to staff a hotel.

There are five. The last few months have seen a spike in mortgage rates. A real affordability crisis has arisen because of that. She noted that higher monthly mortgage costs have helped residential landlords to raise rents as the alternative option of owning a home has become less appealing for some people.

There are six. There's tremendous ability to grow rents over time in areas like student housing and age-restricted and senior housing. We want to be in those places over the next five and ten years.

There are seven. People are going back to work, that's our belief. Changes to the work patterns are possible. Flexibility may be built in. It's possible that certain industries don't care about in office. We think in the office tenant market.

There are eight. This is a really interesting time for us. We don't like them because they can cause a lot of destruction to the market. We talked about the economic downturn. We talked about rate increases. These are the times you wait for as an investor. The inefficiency creates opportunities.

The US housing market is well positioned to absorb a series of corrections as prices fall quickly.