- The US government partial shutdown has had little to no major impact on the markets. The major US stock indices have experienced no abnormal volatility since Monday, US treasuries are stable, and legacy super senior CMBS rates are flat. With that said, the longer it drags on, and, more importantly, the more uncertainty that is created by this and the upcoming debt ceiling debate; the more negative will be the economic impact. Please also refer to the Economic Update from 10/1 for additional information.
- After Bernanke’s comments earlier this year sent yields on the 10-year treasury note as high as 2.99% on 9/5, the Fed’s decision on 9/18 against paring its stimulus has sent yields on 10-year treasury notes back to ~2.60%. It is anticipated that refinance volume will increase in the near term as borrowers seek to lock in lower rates ahead of the eventual tapering.
- Development activity has picked up dramatically and land prices have followed suit. In some major markets land pricing can now support little other than residential condo, and with the cost of construction also skyrocketing, cities like New York may soon find out just how many buyers of $3,000+ per square foot condos there really are out there.
- According to NAREIT, lower tier property prices have risen 12.0% YTD, compared to a 5.7% rise in high end property prices. As the overall economy continues to improve, investors are seeking higher yields in lower class, smaller buildings.
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