The Future of Financing

Historically, a standard indicator of commercial real estate values is the availability of good financing. Whenever the economy is recovering from an economic dip, the increased availability of loans and available properties (that have a lower down payment and lower interest rates), helps to increase demand among buyers. This chain reaction helps to support and drive prices upward.

Keeping this in mind, the real estate market has recovered well within many different sectors since the last recession. The ease with which good financing has become available has significantly supported this recovery.

So what does the crystal ball hold with respect to the future and with the availability of good financing? The good news is that the availability of good financing should continue, as long as the lenders believe that the future of the real estate market remains sound. The bad news is, historically, the market is due for a correction.

Currently, while many markets are experiencing sustained levels of value with their commercial real estate, the pace of buying in many areas has slowed, as buyers seem to be wondering whether or not they should still be paying today’s prices.

However, as long as the economy and the job market remain stable, today’s real estate values should continue to be stable. Regardless, the lenders, to a certain degree, need to keep a watchful eye on where they believe the real estate market may be headed and not just focus on where the market is right now.

With this in mind, the amount of available financing should still remain consistent as long as there are no new warning signs, indicating that there may be a negative economic turn around the corner. In addition, this can be dealt with differently by the various lenders, as the ones that got bailed out the last time may reason that the same money will be made available to them once again, and these lenders can remain aggressive with their lending.

In conclusion, one thing remains true: the level of available financing with good terms for borrowers will probably not get better than it is right now. So if you’re thinking of buying or refinancing, and getting good terms on your loan is very important to you, you may want to take action sooner, rather than later. With interest rates on the rise, keep in mind that it will probably be some time before interest rates become lower once again.

Alex Rhoten is a principal broker at Coldwell Banker Mountain West Commercial Real Estate. 503-587-4777.