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Market Report: Questioning the Fed’s decision on interest rates

In the wake of the Federal Reserve’s decision to keep interest rates unchanged, here’s a roundup of how the development is being digested across the real estate and financial markets.

Nikki Vasco

Vasco

“Some are questioning the decision of the Fed to keep borrower rates unchanged due to global concerns. With employment and inflation near targets, if the Fed would have raised rates, it would have given a level of confidence to the market that would likely have led to a rally. Instead, the market fell flat and volatility continues.” — Nikki Vasco, Chief Investment Officer at FullCapitalStack.com.


Jeff Lee

Lee

There was a lot of speculation over the rate decision and many of our clients wanted to avoid closing in and around the Fed announcement.  Many accelerated closings for last week or earlier this week, while some chose to push off into next week and roll the dice post rate decision and post digestion of Fed Chairman Janet Yellen’s commentary. We did have a few defeasances that priced on Thursday and the clients who elected to buy defeasance securities in the morning were rewarded with higher yields/cheaper defeasance costs.” — Jeff Lee, Chief Operating Officer, Commercial Defeasance LLC


Rehling

You had a window, and you risk that between now and December you have things deteriorate, or you have some new and unexpected source of volatility. If something happens and they are not able to go in December, there is a credibility issue.” — Brian Rehling, fixed-income strategist at Wells Fargo Investment Institute. 


Paul Krugman

Krugman

“The Fed did the right thing last week: nothing. And the howling of the bankers should be taken not as a reason to reconsider, but as a demonstration that the clamor for higher rates has nothing to do with the public interest.” — Paul Krugman, New York Times columnist


Jeffrey Lacker

Lacker

“I dissented because I believe that an increase in our interest rate target is needed, given current economic conditions and the medium-term outlook. Further delay would be a departure from a pattern of behavior that has served us well in the past. The historical record strongly suggests that such departures are risky and raise the likelihood of adverse outcomes.” — Jeffrey Lacker, President of the Federal Reserve Bank of Richmond (the sole dissenter in the Open Market Committee’s recent vote)


Market Report: Looking for Positive Signs in Jobs Number

QuietStream Financial is an incredible place. We celebrate successes big and small.

What does that have to do with the market? Those of you who have stopped by our office in Charlotte know that we ring a bell every time we defease a loan. The bell invigorates the office, as we know that the market is active and value is being traded. Lately, bells have been ringing a lot!

Given the recent defeasance activity, real estate owners either believe what half the economists are indicating — rate hikes are coming in September — or they just realize that all-in rates, valuations and opportunities to redeploy look really good right now.

Hopefully, economic indicators, including job gains numbers due out Friday, will overshadow the extreme volatility of the equities market. A payroll report from ADP on Wednesday says private employers added 190,000 jobs in August, slightly below expectations. The federal government’s report on job creation is due Friday, and economists are expecting 220,000 new jobs, which would be continued modest growth.

Stability of the financial markets will continue to be weighed by the Federal Reserve and give us further insight into the big decision to move rates higher or delay further.

In the meantime, my guess is that the bells will continue to sound!


NikkiBy Nikki Vasco | Chief Investment Officer | FullCapitalStack 

 

Loan Maturing in the Next 4-years? Be Prepared!

Ten years ago, it was very easy to get a loan. Property values combined with low interest rates and loose underwriting standards created an unsustainable “golden age of CMBS originations.” Now, all of those loans originated before the Great Recession are approaching maturity but in a very different refinancing landscape.

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