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The 2019 Stock Market Forecast and Its Impact on CRE Lending

by | Jul 23, 2019 | Blog

The connection between stock market performance and commercial real estate (CRE) prices is not always clear. In general, market analysts correlate instability in the stock market with a higher demand for real estate investments. This occurs because real estate is considered to be more stable than stocks and bonds traded on the stock exchange. Here are some key factors to keep an eye on this year in the CRE market.

Threats of Trade Wars Creating Instability

Tense relations between various other countries and the U.S. have definitely made their mark on the stock market this year. Issues with China, Mexico and other major trade partners have generated plenty of volatility, beginning in December 2018 with a series of market swings that frightened plenty of investors away, at least for the duration of the upheaval.

With tariffs threatened and then withdrawn, the stock market is in a holding pattern with no predictable end in sight. This uncertainty is likely to continue until a definite course of action has been set by the administration and concerns die down among investors about the impact of these tariffs on their stock acquisitions and portfolios.

 

The Fed Continuing to Serve as the Voice of Reason

 

Thanks to the careful steering of Fed Chairman Jerome Powell at the beginning of 2019, the market has largely recovered from its erratic performance toward the end of 2018. Maintaining steady interest rates and taking a conservative approach to market adjustments has created greater confidence among investors in the stock market. The Fed has even signaled that it might be open to a rate cut if the current signs of an impending recession continue to create anxiety among investors.

Because the market is perceived to be more stable, a run on real estate properties has been prevented, which could have driven prices dramatically higher. While most CRE properties continue to appreciate at normal levels, certain areas of the market are seeing rapid growth in pricing:
  • Parcels and areas zoned for cannabis-related businesses are increasing in value more quickly than the general market and are in high demand among investors.
  • Industrial space is also increasing in value, especially when compared with the decline of retail properties and the mid-range performance of multi-family rental properties along the West Coast.

Obtaining the funding needed to get in on these investment opportunities is critical to achieving the highest profitability for your CRE portfolio.

Finding the Best CRE Lending Options

Alternative lending arrangements are expected to remain at the forefront of the financial marketplace for the rest of 2019 and well into the next decade. CRE lending companies can provide funding for land to be used in producing or retailing cannabis and can offer more flexible terms for investors than traditional banks. By choosing an alternative lending company for your funding needs, you can expand your options in the real estate marketplace.
Working with an alternative lender is often the best way to weather the uncertainty of the stock market and to acquire new properties for your portfolio or your investment needs. Exploring the field of CRE lending is a practical step toward improving your profitability in the competitive marketplace.
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