Several months ago everyone was speculating when the Fed would move. At first it was many times this year and then it was potentially not at all. Well the guessing game is over! The first move will come in September with the only question being how much – .25 or .50%. The amount is less critical than the move itself. The data over the past 3-4 months has definitely showed slowing. The question now is whether they are acting too late. My hope is we only graze the iceberg instead of hit it head on. I believe that the former is the more likely scenario.
What does this mean for CRE investors? It means it’s time to come out and play as apartment rates are now at 6% or just under depending on the lender and commercial rates are in the mid 6% range. As caps have increased dramatically on both fronts, investors once again have positive leverage of rates relative to caps. It’s important to keep that in mind since eventually everyone will jump back in, drive up demand and commensurately force caps back down. Now is the time to take advantage of that delta!
While the lending landscape remains choppy, there are new lenders coming into the market (finally!). As well, many have increasing capital to lend with the only headwinds being challenges in their consumer areas of credit cards and auto loans with delinquencies rising quickly (which ties back to my concern about grazing or smashing into the economic iceberg). That said, given the difference between rates and caps, debt coverages and loan to values have come back into a more sustainable range.
All of that to say, ‘The Time Has Come’. We are ready to help on the financial part of that process!
