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| John Oharenko |
Chicago, IL, March 1, 2019 - The Chicago-based Real Estate Capital Institute states that with inflation seemingly under control
and economic conditions and the best job growth of the past half-century,
global bonds yields are treading in very shallow waters.
Mortgage rates
also benefit from trading in a narrow, again defying ongoing forecasts of
rising rates. As long as long-term rates stay low due to decreasing
manufacturing production and tepid consumer spending, Fed rate hike threats
seem distant.
As is the case for nearly a decade, commercial real estate markets are
fundamentally sound. Markets are in balance, but downside risks are
surfacing even as the economy offers another year of solid performance with
the following concerns hover over realty capital markets:
The "R" Word: Yes, "recession" is mentioned often, but still no signs of
serious concern. Pundits stopped using the baseball-inning analogy years
ago, as many see the markets in record overtime mode, well beyond the
traditional nine-inning game. Like baseball, the markets don't succumb to
the clock.
Will this year prove to be another solid inning?
Yield Curve: Last month the yield curve stayed in a tight range of 20 basis
points for the five and ten-year treasuries - a similar pattern dating back
to last fall. A flattening yield curve usually signals worries about a
moderating economy. The insatiable global demand for 'safe' yields keeps
long-term treasuries very competitively priced.
Concerns about slower
growth are less pronounced in the current yield curve, but conditions could
change if job growth, inflation, international trade or other unforeseeable
variable(s) change the equation.
Product: Investors and lenders are truly concerned about maintaining
production volume levels comparable to 2016 to 2018 - record years for many
players.
While funds are readily available, the lack of quality product for
acquisition or financing poses significant issues for reaching reasonable
investment goals. Many believe the low-hanging-fruit deals are long gone.
"Capital flow is steady and readily available, with little reason to expand
because of a shortage of deal flow," advises John Oharenko, director of The
Real Estate Capital Institute(r).
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The Real Estate Capital Institute(r) is a volunteer-based research
organization that tracks realty rates data for debt and equity yields for
the domestic market.
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The Real Estate Capital Institute(r)
Chicago, Illinois USA 60624
Contact: John Oharenko, Executive Director
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