"There is no doubt that capital markets are rebounding, as witnessed by the nearly 60% bounce in the stock market since the low in March 2009, and the greatly narrowed spreads on LIBOR, high-grade corporate debt and, more recently, junk bonds," Linneman writes in "Capital Markets Show First Signs of Recovery," the newest in a series of white papers. "Bank excess reserves at the Fed remain slightly over $1 trillion, suggesting that these banks could create $7 trillion-$8 trillion in new loans."

Financial institutions are still reluctant to lend, a fact that Linneman ascribes primarily to their increased focus on "dealing with Washington and problem loans, as well as the difficulty of making good loans in a world of falling asset prices. But as asset prices have hit bottom, we expect a return to selective lending by banks."

Addressing a question on the minds of many, Linneman sees rising asset prices and falling cap rates eventually coming to pass. Over the next three years, he writes, "we anticipate that, absent an unusual inflationary surge, the 10-year Treasury rate will rise approximately 150 basis points, while the risk premium associated with property will fall by as much as 250 basis points." Additionally, as job growth begins to absorb "the vast amounts of space emptied during the great panic," the expected long-term growth rate will rise by approximately 100 basis points.