Market data and other field intelligence indicates momentum is starting to build for a busier second half of 2024. In fact, several rate cuts by the Fed between April and July would add to the likelihood of a rebound in the second half of 2024, according to a recent report from Lightbox.
This forecast alone is likely to deliver early indications of a modest uptick in property listings leading into the second half of 2024. In reaction to this activity, capital that has mobilized in anticipation of this new wave of investment opportunities will make a move. As a result of these new transactions, the demand for environmental due diligence and appraisals will follow. The forecast does, however, account for a potential short-lived pause in the third quarter, as is typical preceding a presidential election.
According to the report, there are several noteworthy market developments impacting this forecast.
First, yields on Treasury Bonds have dropped sharply over the last 90 days. In fact, yield on the 10-year bond is down more than 100 basis points since November. This is positive news for the industry, as the lower rates allow for more acquisitions to produce desired returns. In addition, this development will also make refinancing less challenging to borrowers than it was just three months ago.
The second noteworthy development in the market is the considerable compression of risk premiums since early November. Lending spreads have tightened significantly since the fall, which has put additional downward pressure on lending rates. Ultimately, this will also allow more deals and refinancing to pencil out.
Overall, the funding available for purchasing either performing or distressed assets has continued to increase. As a result, the pressure to put that cash to work is building.
Finally, sales have already started trickling in in some of the most distressed markets. This includes San Francisco, Chicago, and Baltimore office markets. While these sales are not at the desired levels, they are important as they represent important benchmarks for the markets. Specifically, once distressed market sales start and price discovery occurs, the markets become positioned for another wave of transactions. With bottoms forming in many markets, optimism for a forecast of higher transactions in the second half of 2024 is high.
Based on market data and field intelligence, all indications are the second half of 2024 is on the trajectory to be busier, with an optimistic forecast.