???? Live: #USAConference 2025
US Real Estate Debt in the Current Rate Environment
Richard Flohr, Partner at CrossHarbor Capital Partners, dives into the evolving landscape of real estate debt and its implications for investors.
With the theme “The Future Ain’t What It Used to Be”, he examines the US capital markets.
One of the most reliable recession indicators, the 10-year vs. 2-year Treasury yield curve, has turned negative — historically a warning sign. Yet, no recession has materialized. Flohr discusses whether a downturn has been postponed or truly avoided.
Interest rates remain a focal point. While markets have historically predicted rising rates, reality often differs. The current outlook suggests rate cuts, but the growing US government debt could push yields higher. Despite record-high debt-to-GDP levels, Flohr argues that the cost of servicing debt remains manageable. Inflation is under control, and banking stress is not a major risk.
On the global stage, the US economy outperforms its G7 peers, with a 2.8% GDP growth rate compared to weaker growth—or even contraction—in countries like Germany and Japan. The dollar remains the world’s reserve currency, the US is energy independent, and its capital markets are the most sophisticated, giving the Federal Reserve more tools to manage future downturns.
???? Flohr’s key takeaways: The size of the US deficit could limit the Fed’s ability to stimulate the economy in the next recession, potentially making it longer and deeper. Interest rates may stay higher than expected, especially if debt continues to outpace GDP growth. In this environment, real estate debt is likely to outperform equity investments, and the US remains the most attractive developed market for investors.
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