Contrary to earlier predictions, office leasing activity improved in the…
The Federal Reserve announced an interest rate hike by another 25 basis points increasing interest rates from 5.0 to a range between 5.25 and 5.50%, the highest point since 2001. Chairman Powell says the Fed is concerned about global food security and constrains on the housing supply in part due to homeowners reluctant to move because they have low-interest rate mortgages.
This expected increase, following last month’s pause, is taking place as the economy continuously cools, with inflation slowing to 3.1% and core inflation (excluding food and energy costs) dropping to 4.8%, the lowest they been since June and September of 2022, respectively.
Powell’s mission going into the meeting was likely to keep market expectations of another rate rise later this year “priced as a coin flip,” said Daleep Singh, a former executive at the New York Red who is now chief global economist at PGIM Fixed Income. “Pricing the next set of decisions as a coin flip maximizes flexibility for the Fed to react to incoming data.”
In my conversations with lenders, their relationships with borrowers and being creative with their financing outweigh watching a loan go bad. Additional collateral, higher down payments, and creditworthiness of the tenant(s) all play a role in approving loans.
“Lenders will continue to focus on cash flow and debt serviceability, and will remain highly selective, but can be highly competitive for deals they like,” says Henry Vuong, PGIM’s head of Real Estate Investment Research.