CRE Lending Update: Bumps, Adjustments, and a Glimpse of Sunshine

Capital Markets Update
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.

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.

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