The TreppWire Podcast: A Commercial Real Estate Show 287. Hope is Not a Strategy: CRE Extend & Pretend, Home Mortgage Rates, & Hot Hitting Stories
Nov 1, 2024
This discussion dives into the latest economic data, spotlighting mixed results in GDP and consumer spending. The rising home mortgage rates heavily impact homebuilders, prompting strategic shifts. An insightful comparison reveals LA's commercial real estate thrives post-Dodgers' World Series win. The 'extend and pretend' strategy emerges in managing troubled loans, with both risks and potential restructurings. Lastly, trends in industrial real estate transactions highlight vibrant market activity across various states.
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Economic Overview and CRE Concerns
- The economy appears to be growing steadily, despite mixed signals from various economic indicators.
- The average home mortgage rate briefly exceeding 7% raises concerns for the commercial real estate (CRE) market.
Mixed Signals in Job Market Data
- Job openings (JOLTS) data came in lower than expected, causing treasury yields to fall initially.
- However, stronger-than-expected ADP non-farm payrolls data later pushed yields back up, particularly on the short end of the curve.
Homebuilder Performance and Mortgage Rate Buydowns
- Homebuilders have seen stock prices double during the rate hiking cycle due to low existing home sales.
- However, builders are buying down mortgage rates, impacting their profit margins by 3-4% for every 1% buy-down.