Commercial real estate in 2024 – what is the outlook?

He peeked into the future to assess what might happen in the first and second half of next year. “I imagine that deal activity remains slow for the first half of next year, and it’s possible that continues into the second half,” Snyder said. “But given what we know about rate expectations –that if we get lower rates next year – that will probably lubricate the credit markets a little bit and start to speed things back up. That would buoy transaction volume, and with more transaction volume price discovery would occur more quickly because there would be more comparable transactions to reference.”

The market is giddy about the Fed’s final meeting

At its final monthly meeting of the year earlier this month, the Federal Reserve opted to leave interest rates alone – signaling its tactic to raise rates to tame inflation is done and it may actually cut interest rates a handful of times next year. The announcement sent the Dow to historic high levels while spreading optimism of a better year ahead for the mortgage industry than this year has been.

While the Fed does not set mortgage rates – they move along with the 10-year Treasury yield – the body’s actions influence them as it makes changes to the federal funds rates – the rate by which banks charge each other for short-term loans.

Staying alive ‘til ‘25

“There’s this tongue-in-cheek reference about staying alive until ’25, and I think there’s some truth in that and the truth comes from, in part, where interest rate expectations are moving,” said Snyder. “There is great expectation of rate declines and also the pace of mortgage maturities. There’s a lot of debt coming due in 2024 and 2025. If you can get through that time, then I think things will begin to pick up maybe mid-2025 would be my best guess right now.”

Indeed, it’s been a year of transition, the First American economist said. One thing about 2023 was clear – the strength of the consumer. “Consumer strength has been quite strong lately,” Snyder said. “The third quarter of this year, GDP growth was driven largely by consumer spending. And a lot of that is due to fiscal stimulus, which has now been curtailed, obviously.”