Could the CRE market eventually become overheated?
The Fed recently made projections that interest rates would not be brought up until 2023. They stated when maximum employment and inflation "moderately above 2 percent" are achieved, that an accommodative stance on monetary policy would be maintained. Rates in the meantime would sit between 0 and 0.25 percent.
The Fed also announced as a part of its plan that they'd increase the holdings of mortgage-backed securities as a part of its commitment. Looks like the CMBS market could rise up given this, although not for the best of reason?
Do you think this latest announcement about the economy could cause an overheating in the CRE market?
It seems like most of it is going to be uneven. Retail, hotel and office are what I speculate will benefit the most, but I fear that multifamily and industrial could become very overheated with too much overcrowding in those sectors. Prices were already at record highs prior to recession, and I can't tell if prices have come down substantially enough that others are hopping back into the market.
Additionally, I can see a prolonged low-interest rate environment, assuming rates do stay low till 2023, to push property values upward but what kind of effect can we expect when the fed does raise interest rates? Possibly nothing because the market only repeated itself where investors are squeezed out by the higher price of real estate itself?
Curious to hear what you are all thinking.
The market as a whole went from drinking too much coffee from 2008-2013, then switching to espresso double shots and Red Bull from 2014-2016, to pounding cocaine from 2017-2019. Then just before having the by now long overdue heart attack, was hit by a truck (COVID) and is now in the hospital on life support and slowly getting better.
That’s the image of America I see in my head when they say the economy is “recovering”....shit is not all good no matter how anyone tries to spin it.
My view is that we are either facing a distended Frankenstein economy propped up by all sorts of misguided government policy as we head into the next decade....or we have a shake out of all the dead wood.
Knowing how people are, people will do anything they can to prevent wholesale change. So CRE office space should die a swift death but will instead be slowly cannibalized by every other industry that needs real floor space.
There is a reason why most real estate research firms publish property clocks in some way, shape, or form.
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