Real Estate Lending: Bumps in the Road, but a Brighter Future?
Things haven’t been easy for commercial real estate lending lately. Higher interest rates, a slowing economy, and stricter loan requirements have thrown some sand in the gears. Refinancing loans is especially tricky, and figuring out property values is a bit of a puzzle right now.
The silver lining? The forward yield curves suggest a low probability of the U.S. Federal Reserve implementing further rate hikes in 2024.
Here’s the breakdown:
Multifamily lending is leading the charge, with a predicted 25% jump to $339 billion this year.
Overall, CRE lending is expected to reach $717 billion, which is still lower than pre-2017 levels, but it’s a step in the right direction.
Experts expect interest rates and borrowing costs to come down a bit, and transaction velocity to rebound by 20% to 30%. That means more deals are likely to happen.
Prices are down: On average, they’ve dropped 28% from their peak.
Of course, there will still be challenges. The number of real estate brokers is expected to shrink by 15-20% by year’s end, so competition might get tougher.
Overall, the outlook for CRE is cautiously optimistic. The market is adjusting to the new normal, and there are signs of a potential rebound later this year.
