The mood at the MBA convention last week was very upbeat with several conduit lenders increasing their goals by more than 100% for 2014. At the convention, MBA reported that commercial and multifamily mortgage originations for 2013 were 15% higher than in 2012. MBA projects originations of commercial and multifamily mortgages will grow to $300 billion in 2014, an increase of 7% from 2013 volumes, and continue to rise to $333 billion in 2016.
The 10-year treasury yield dropped to 2.57% last week from a 2 1/2-year high of 3.05% on January 2nd as a slowdown in U.S. jobs growth and turmoil in emerging markets from China to Argentina drove demand for safety. Citigroup reported that investors have withdrawn money from emerging-market equities for a 15th straight week.
In the US, we’re about five years from the bottom of the market. Below is a look back at the last five years:
- 2009/2010 – If you weren’t sitting on the sideline you were probably looking to buy deeply discounted paper or looking to make a really expensive, low leveraged senior loans.
- 2011/2012 – The focus was safety and quality with investors focused on core assets in primary markets.
- 2013 – The focus was yield. Investors moved out to the secondary markets and into development.
- 2014 – The real estate capital markets are extremely liquid, and the stock market and bond market can be a scary place to invest. We expect to see a lot of capital continue to move out the risk curve to chase yield. Foreign investors are expected to continue to view the US as a safe haven and will not only continue to pick up trophy properties but also follow the other capital into secondary markets.