Challenging Economy Shows Underlying Resilience and Flexibility
During Arbor’s recent finance conference, “How to Navigate the Capital Markets Storm with Agency Lending” in Dallas on June 10, Dr. Sam Chandan, Chief Economist for Reis, Inc. outlined a number of forces that are weighing on the economy:
- The housing market
- The economy
- Inflation (how we spend our money)
- Value of the U.S. dollar
- Increase in food and fuel prices
- Loss of confidence in international markets (as reflected in devalued U.S. dollar)
However, he noted the underlying resilience and flexibility of the U.S. economy remains intact in the midst of most challenging adjustments.
Other stresses on the economy Dr. Chandan pointed out are:
- The housing market: The pool of houses for sale has changed significantly. There were more homes built than Americans can (afford to) live in.
- Corporate profits: While they have slowed significantly as of late, they will prevail over the next 1-2 years.
- Oil: Our economy is more information- and services-based rather than on manufacturing. As a result, there is reduced energy consumption.
- CMBS: The CMBS market has been sidelined. At its peak, almost 70 percent of all multifamily mortgages were from CMBS. As of first quarter 2008, that number has fallen to 7 percent.
Capital is more abundantly available via the federal agencies. Through their lending partners, agencies funded $12-13 billion of commercial financing in 2006. By fourth-quarter 2007, that number grew to $85 billion.
The outlook sees fairly anemic growth. The credit markets will remain restrained and financial volatility will persist. Housing markets will deteriorate through early 2009. |