Good morning to Springtime, and may the helpful rains continue;
Commercial and Residential Lending
The Business and Investor Side of Our Business
Not political, just a small business owner who loves a good laugh, yet understands the message conveyed. This clip makes the point and expresses well, the frustration. Let’s talk.
1) Interest rates: Down a bit, then up a bit.. Traders are doing well, as the market stays hot on speculations of what comes next.
Federal Reserve meeting on Wednesday along with their quarterly economic update report. This one will set the tone for the next couple of months. I am not optimistic after last weeks Core PCE, employment and other reports all coming in stronger.
The 10-Year is still in the range of 3.8 to 4.5 %, ending last week also under 4.25.
The 2-Year vs 10-Year yield curve has been negative since July of 2022. 3X hitting 1 % negative (March, June and July of last year). 2009 was last time the negative period was this protracted. .
2) Residential Real Estate: Business is brisk overall, with Buyers actively seeking property. Low inventory continues to exacerbate the business, offsetting the sticky high interest rates. Market leaders and current data continue to point to strong price support and mild appreciation to be expected.
We are hearing that up to 50 % of the loan officers around the country are no longer active. We are and remain 100% active and ready to take your call! Excellence endures.
3) Commercial Real Estate: Like residential, people are shopping, sellers are selling, but far off the volume seen post Co-Vid. Cap rates trending up, but with slim volumes helping to keep the increases modest at best.
4) Federal Reserve: Coming off recent inflation reports covering the last month, plus updates to GDP, “hedging” is strong. As much as the market would like the 3 rate cuts intimated last December, my expectations is this weeks Fed meeting will dial back such hope.
It is clear, more time is needed to work through recent Fed rate increases, plus the Fed clearing off about 100 B off their balance sheet – each month. This alone will keep financing costs tight.
Overall, the labor market continues to be strong, with the economy doing quite well. But there are more than a few cracks in the foundation – increasing credit balances; upticks in credit card and auto loan defaults.
In California, non-farms payroll is half a million more than pre-CoVid. For Silicon Valley alone, number of employed is above pre-CoVid numbers.
SPECIAL NOTE:
Foreclosure Assistance
For some commercial Investors, time is needed to work through the financial distress – triggered by CoVid – and the impact of rising lending costs upon company balance sheets and cash-flow statements.
The numbers are there, about 16 % of the office loans (just one sector of the commercial marketplace) will mature this year. About 150 B worth, and add to that the same amount scheduled for both 2025 and 2026.
As a result, tough choices are being made to stay the course. For some, that time is now! In light of this, we are actively working with commercial property owners and lenders to help resolve this imbalance. Why? To help negotiate needed modifications to maintain any current underlying loans.
The goal: Keep the property in the hands of the investor and thereby avoid issues surrounding default. Even more, this is a benefit to the banks, as well.
The challenges we address and renegotiate for our clients:
Commercial loan coming due,
Valuations dropping below guidelines,
Income no longer supports the current loan and operating expenses,
Payments are behind
If this can be helpful to you or someone you know,
please call today. Each day matters.
Good News: Commercial investing, as a whole, is quite diversified, thus able to match and meet most investor’s financial goals and interest. Our goal: Best matching our clients with the best lending options and customized programs. Let’s talk, today. Early preparation is key.
Call us. We are ready to help today.
I hope you find these insights and economic news helpful for Commercial Investing
as well for our Residential work! Key – Discipline, Preparation, and Patience.
Banking and Financing: DIY or using a Broker.
DIY: Benefit: You can trade on your historical connection with your Bank. Downside: You are not always sure they are actually getting it done. The Bank loan agent brings the deal in the door, but they are not allowed to tell you the percentage of actual closings.
Broker: Yes, you do pay a point – Except with SBA and residential lending. Benefits: Our connections to lending sources, interaction with industry groups, and continued conversations with our peers. This brings about true and open competition able to quickly adapt to the shifting landscape and your unique situation. Do you benefit from hiring Mike Ryan? Time proves to be Yes. And with future challenges ahead, all the more reason to call. As a Broker, your victory is my win.
General Commercial Market:
Commercial: As mentioned, “deal” volume is down dramatically. This, as the marketplace continues working through a post Co-Vid recovery cycle, plus the overall market cycle. Trying to harmonize these two different cycles, with inflation, makes sound predictions difficult.
In todays market, one needs to carefully watch and review what one has, seeks, or needs. We can help address many of your questions. Yet for some, extra patience will be needed, taking note that waiting may have its’ own trade-offs. This is where our conversations becomes key to our goals: Improve perspective, consider the potentials of all relevant possibilities, and weigh the difference. This conversation is what I enjoy most. Let the process begin – Call.
Apartment Sector: Apartment numbers continue to show stability. This with the large number of units coming to market in 2023, plus those expected to be delivered in 2024. Combined, this will help keeps rental growth quite subdued. Outcome: Low single digit rental increases. Current exception appears to be in Silicon Valley.
Jobs, jobs and jobs: We continue to see low numbers from the weekly unemployment claims. The question: When will all the news about corporate lay-offs show up in the weekly numbers. NOTE: When you review the layoff reports, each week, they add up to possibly tens of thousands of planned layoffs. Not hundreds of thousands. Be watchful.
Those with “continuing claims” has risen to near new highs at 1.9 M receiving continuing benefits. Note: once not working, such numbers indicate its harder to find a new job.
Good News:
Our commercial successes continues. The depth of our lending partners allows us to work with certainty of execution. We are getting it done, because we know how!
An area we regularly gets the most calls are for out-of-state properties. For us, the loan amounts seem quite small – sub 1 M loan amount – and have their own bucket of challenges. The difficulty: Smaller loan amounts within smaller populated areas, too often causes main stream banks and lending platforms, to leave them alone. Not us. We dig deep and often find solutions for our clients unique projects, regardless. Who do you know scratching their head with worry over a small, out-of-area project? Call today! We can help.
Consider as well, from business-purpose loans – with light documentation – to re-development building projects for housing and commercial property purchases. How does this work? It works because of who we are. We offer a broad range of lending partners able to provide flexible loans, excellent programs, and great terms. It is how we help move your life forward and our track record shows it. It is what keep our phone ringing. Let’s talk. We can help.
Consider Loans coming due. They are in high demand, as evidenced by our increased work to refinance various commercial properties. Recent statistics show 30 % of maturing loans were refinanced, 25 % were modified and 40 % are in default. Thus it’s important to check loan parameters and due dates. Don’t miss the annual lender requested financial statement. Key: Stay ahead of coming due dates to keep your lender smiling. Good organization is most worthy.
At the same time, if you have troubles, please note: We can help with loan modifications
Good News: We have great lending partners. They respect our work and attention to detail. This is good news for you, as they trust our approach and loan packages. In response, we carefully strive to maintain the quality of their depository relationships. This is called team chemistry and is what makes our lending relationship, a winner. Join our team.
You have heard me say: It starts with a first conversation. Let’s talk.
Enjoy your family and friends this season. With all the financial talk, the most important part is who we have around us. Be well and be safe!