Credible CRE

Notes from MBA CREF 2025 this week: -Expect a lot of #distressed deals this year -Mixed picture in the job market. It’s taking much longer for job seekers to find #employment -Household #debtservice is still low due to pandemic-level refinances (low interest rates on long-term loans). -Savings rate has declined to only 3.8% of disposable income. -#Tariffs will hurt other countries more than us because other countries are more dependent on exports as a percentage of GDP compared to the US. -Tariffs will increase construction costs (so it makes sense to be very cautious on new ground-up construction deals) -#Equity premium is negative. You’re paying more for a less safe asset. -For multifamily, there is excess supply in certain markets but rent growth is slowing more broadly. #Sunbelt makers such as Austin, TX seem a bit overbuilt but that can be absorbed if people keep moving to the Sunbelt. -If #rates stay high and lending tightens, it will be tough for many who need to refinance. -#Delinquency rates are up for every product type except industrial. -#Lenders are forcing payments rather than continuing to allow extend and pretend. Core relationships have flexibility here and at the discretion of the lender.

Top 10 Takeaways from NMHC’s Annual Meeting 1. The waiting game continues – #Investors expect deal flow to pick up in late 2025, but #sellers are holding firm on pricing. 2. Rent growth may return this year – Demand is solid, supply has peaked, and even high-supply markets could see positive #rent growth. 3. Plenty of capital, few opportunities – Investors want high-quality assets, but pricing gaps and limited #distress sales make deployment tough. 4. #Banks are cautiously re-engaging – Loan-to-cost ratios are creeping back to 60-65%, but equity remains the bigger challenge for developers. 5. Sun Belt stays hot – Markets like #DFW, #Charlotte, and #Orlando remain investor favorites, while #Houston could outperform in 2025. 6. High-regulation cities are out – #Institutional #capital is shifting away from LA, SF, and NYC toward "gateway-adjacent" and suburban markets. 7. Operational efficiency is key – #AI, centralization, and cost-cutting strategies are now a top priority for multifamily owners and operators. 8. New development is back on the radar – Suburban garden-style projects are getting more investor attention, but only if costs pencil out. 9. Regulatory risks are a bigger headache than ever – Rent control, #eviction laws, and unpredictable policies are making underwriting more complex. 10. #Insurance costs remain a wildcard – 2024 renewals were stable, but hurricanes and wildfires could drive up costs in 2025.

Notes from IMN Winter Forum Panel 1: Assessing #Macroeconomic Factors Impacting #CRE -“No one knows where rates are going including the #Fed, and they set the rates. If you look at historical Fed dot plots, it’s been wrong every time.” -Rates are so volatile right now that it makes it hard to predict. -Rents have probably stabilized (not much room to go up). -Deals will still get done even in this #interestrate environment. -There is some certainty that tax cuts are ahead, but the question remains as to when. -The reason for the spike in 5-year swaps is because of the national deficit. -#Trump loves debt so this presents a conundrum. -#Insurance is going to skyrocket so you need to underwrite that. -Interest rates are low when looking at a historical perceptive but most of us have a recency bias of when rates were near 0%. -Property #taxes and insurance cost increases are crushing NOI -Supply and demand dynamics in housing isn’t something that will fix itself anytime soon (aka home prices will probably continue to rise). -There seems to be pressure for banks to limit or cut down on CRE lending. It could be because about every 10 years there seems to be a bank crisis stemming from CRE. (S&L Crisis, GFC, 2023 bank failures, etc). -Thus, there will be a capital shift to alternative lending out from traditional banking. -#Retail is back but it took ~10 years. It’s yet to be seen how long it will take office to come back. -Panel is very focused on: 1. #tariffs (big question mark on who will be hit, how much, and magnitude of effect), 2. #inflation, 3. national #deficit, 4. #construction costs, 5. interest rates, 6. cap rates, 7. global instability (war and slowing growth), 8. residential supply / demand dynamics.

2025 Rate Cuts? What's the deal. The Federal Reserve is cautiously approaching further rate cuts in 2025. St. Louis Fed President Alberto Musalem recently shared insights on the evolving economic landscape. While inflation has moderated, risks remain that it could stabilize above the Fed's target range. Musalem emphasized the need for gradual rate adjustments, noting shifts in economic data and inflation trends since September. Key points: -Inflation remains a concern, with the potential to settle between 2.5% and 3%. -The labor market is strong but requires close monitoring. -Long-term interest rates are climbing, driven by higher real yields rather than inflation expectations. -Policy responses to potential new tariffs under the Trump administration remain uncertain. With a complex $30 trillion economy, the Fed’s decisions will require patience and adaptability. What are your thoughts on the Fed’s cautious stance? Let’s discuss. #FederalReserve #Economy #InterestRates #Inflation #CREFinance

Join Us for an Exclusive LinkedIn Webinar: Transforming CRE Finance with Diald Are you ready to take your CRE strategy to the next level? Credible CRE is excited to host a live interview with Eduardo Foss, COO of Diald, the innovative AI-powered platform revolutionizing risk assessment and deal analysis in the CRE space. Edu will share insights on how Diald is reshaping industry norms and provide an exclusive demo of their cutting-edge product. Whether you're an investor, lender, broker, or CRE professional, you’ll gain valuable strategies to streamline your due diligence and close more deals. -Date: Thursday 01/09/2025 -Time: 11:30am PT / 2:30pm ET -Where: LinkedIn Live Don’t miss this opportunity to learn from a leading expert in CRE technology and see Diald in action. Reserve your spot today!

?? Top 10 Up-and-Coming US Markets for 2025 ?? Americans are trading crowded, costly urban hubs for quieter, affordable alternatives. Here's a ranked list of cities gaining attention, combining affordability, opportunity, and quality of life: 1?? Madison, WI -Highly educated population -Thriving arts, food, and outdoor scenes -Housing values up 5.5% last year 2?? Fargo, ND -Affordable housing -Young population (average age: 33) -Low unemployment 3?? Lincoln, NE -Tech job growth -Unemployment at 2.6% -Housing 21% below national average 4?? Provo, UT -Fast-growing city -Median household income > $100K -Outdoor paradise 5?? New Haven, CT -Walkable, bikeable -Yale University + vibrant cultural scene -Home values up 8% in the last year 6?? Omaha, NE -Home-price-to-income ratio 24% below national average -Fortune 500 companies, low unemployment -Affordable housing 7?? Ann Arbor, MI -Walkable, with thriving tech and culinary scenes -Home to the University of Michigan -Largest stadium in the country 8?? Fayetteville, AR -Low cost of living, outdoor activities -Home to Walmart HQ -Property values up 67% in 5 years 9?? Portland, ME -Home values up 66% in 5 years -Beaches, mountains, forests nearby -Unemployment at 2.2% ?? Hartford, CT -Blend of historical charm and modern amenities -Rising home values -Above-average salaries Which of these cities surprises you the most? Let’s discuss! ???? #RealEstate #Relocation #EmergingMarkets

?? Banks Shift CRE Lending to Private Equity Amid New Basel III Regulations New Basel III Endgame regulations, set to roll out in July 2025, require major banks to hold more capital, making direct CRE lending less attractive. Instead, banks are turning to private equity to handle loans through warehouse lines and other structures, effectively outsourcing risk while maintaining involvement. ?? Key Trends: -CRE lending by banks dropped to 18% in Q3 2024, from 38% a year earlier (CBRE). -Alternative lenders now lead, with debt funds seeing a 70% YoY increase in activity. -Basel III will require banks to hold 16% more capital on average, impacting profitability and lending capacity. ?? What This Means: -Private equity firms are gaining market share in CRE, taking on roles traditionally held by banks. -This shift could drive innovation but also increase risks in less regulated lending spaces, as noted by JPMorgan's Jamie Dimon. -CRE players should anticipate higher costs of capital and adapt to alternative lending dynamics. The CRE lending landscape is evolving—how will your strategy align with these changes? Let’s discuss! #CommercialRealEstate #CRELending #BaselIII #PrivateEquity

Market Update: Fed Rate Cut Pause in December? Nomura predicts the Federal Reserve will pause its rate-cut cycle in December. Key takeaways: -Rate Outlook: Nomura projects only two 25-basis-point cuts in 2025 (March & June), maintaining the Fed funds rate at 4.125%. -Economic Context: Fed hesitancy reflects inflation concerns amid growth and political shifts after Trump’s election win. -Policy Impact: Anticipated tax cuts, tariffs, and immigration reforms could push inflation higher, delaying further rate reductions. Market sentiment is shifting—are you ready for what’s next? Let’s discuss! #Economy #FederalReserve #InterestRates #Finance

Is it possible for the #Fed to stay completely independent from #Trump? The Fed cut rates 25bps amid cooling inflation, but Powell faced questions on his independence, as #Trump’s election raises concerns of policy influence. Rate-cut plans may shift due to potential inflationary policies.

We've been silent on LinkedIn for a while but we're back. It's Buy Time! Oxford Economics anticipates a CRE investment window within 12-18 months, with top #opportunities in #industrial, #hotels, and #residential sectors, especially in Europe, followed by North America and Asia-Pacific.