Good morning to Springtime Investing,
Commercial Lending
The Business and Investor Side of Our Business
Needed healing of serious supply chain issues continue. Shipping in California was off from the heavy winter weather, and in March, shipping was a challenge for State exports – flooded land, road closures, heavy rain. Add to this, a reduction in imports resulted in less ships being available to transport goods at West Coast ports. Good News: Drop in fuel costs and fallen demand, has resulted in shipping prices dropping to pre-pandemic levels.
1) Interest rates: Rates continue trending sideways. Call to learn more to see how these numbers influence your mortgage decisions. We are running at the low end of the trading band of the past 6 months for both the 5-year and 10-year T-Bills.
2) Residential Real Estate: Nationwide, we are seeing an increase in activity – as expected. The joy of Springtime buying is at hand. Overall, home prices appear to still favor the Buyer, at the same time, Realtors in parts of the country, are reporting that a bit over 50 % of homes, in contract, are more than the list price.
Also of interest: Multifamily Rents. They continue to increase, yet at a slower pace.
Growth March to March vs April to April, from 4 % to 3.2 % . The same is noted for SFR rents, as Occupancy has stabilized at 95 %. Key: Demand is concentrating in more affordable properties , as the economy cools and consumer savings dwindle.
3) Apartments: Apartment construction looks to better times, with unit sizes being built, beginning to reduce. This is good, as entry level units – across multifamily and residential properties – has been the most under built sector. More Good News: There is an ample supply of capital, sitting on the sidelines waiting to be deployed. This will help future construction.
4) Commercial: Jobs, expectations, and Federal Reserve policy weighs on commercial real estate. Call us. Let us help you prepare the ways to best navigate these choppy waters.
Outcome: Conversations with many Federal Reserve members suggests future rate hikes. Expect no reductions in 2023, yet some market forecasters hints at a 70 % chance for a cut in September. It reminds us, the Fed is seldom transparent regarding changes in direction.
Good News: Commercial investing, as a whole, is quite diverse, able to match and meet most commercial investor’s financial goals and interest. Our goal: Matching each of our clients with the best lending options and customized programs. Let’s talk, today.
Call us. We are here to help.
Economic News
Banking and Financing: It remains a priority. First concerns center around the worry of available financing, as a sizable number of loans begin to mature. It raises questions as to the quality of bank balance sheets – changes to stress tests, available lending options, overall liquidity worries, and management. The coming years could be challenging and revealing.
Historically, many commercial loans are financed through life insurance companies. Currently, they are pulling back from office buildings. Another tightening trend will likely be in offices space, as we see more work-from-home strategies. It may become the new norm.
Retail, Restaurants and Hotels: Holding up quite well. In spite of a drop in savings and fears of inflation, people continue to enjoy going out – food and entertainment. Expected declines has not yet materialized. People are quite imaginative and quick to adapt, when called upon.
Manufacturing: Not all news is bad. In 2022, an estimated 1800 companies re-shored their production – adding near 350,000 new jobs. Broad based logistical issues provide the best reasoning. Regardless, as a benefit to our economy, such re-shoring should continue.
Wild card: Consider an interesting prediction. CEO’s may choose downsizing real estate vs layoffs, to support the P&L and balance sheets. This bodes well for employees and speaks to the job market ”feeling’ tight. Yet it may challenge occupancy of commercial office buildings.
Good News: Our commercial success continues. Two notes of success: completing the financing of a local tear-down, and closing a cash-out refinancing of a Mobile Home Park in Santa Cruz County. Why Mike: We offer flexible loans, excellent programs and great terms, plus our proven track record. It keeps our phone ringing. Let’s talk. We can help.
Of particular need: Loans coming due. They are in high demand, as evidenced by our increased work to refinance various commercial properties. Suggestion: Check loan parameters and due dates, and don’t miss the annual lender requested financial statement. Key: Stay ahead of coming dates, and keep your lender smiling. Let’s talk.
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 this lending relationship a winner. Join our team.
You have heard me say: It starts with a first conversation. Let’s talk.
Have a joyful Spring, as the smell of new flowers and blossoms fill the air. Many blessings.