Commercial Prices Declining: Great Time for Investors
No real estate investor wants to purchase at the peak of the market, which is why the saying “buy low, sell high” is predominant in the financial industry.
With interest rates continuing to rise, July saw commercial property prices decrease by 1-percent. This is due in large part to the cost involved in financing commercial transactions.
The telltale Green Street Commercial Property Price Index reports 4-percent gains over August 2007, even though the market declined over the last six years. While property values overall have increased over the last year, with interest rates increasing, the commercial real estate market’s recovery has been put on hold.
Many investors anticipate that the Federal Reserve will soon announce a plan to scale back their stimulus plan, which was originally designed to help fuel economic recovery and boost the real estate market. The 10-year Treasury note yield has increased from 1.63-percent to 2.66-percent.
While the Federal Reserve is buying $40 billion worth of mortgage debt and $45 billion in Treasuries each month, hoping to put pressure on interest rates. The government has more than $5.75 billion in Treasuries that are set to mature between May 2018 and April 2019.
The authoritative Moody’s Investors Service highlighted a decrease of values from April (with numbers reporting in May) highlighting a decrease of 0.6-percent. This number increased from a year prior, showing a 6-percent increase. This means that these results do not reflect the current economic impact that higher interest rates have had on commercial property values.
Experts predict that commercial real estate property values will remain consistent, or experience a slightly further decline. These numbers directly correlate to employment rates increasing and rent occupancy rising.
Better Than Loans, a direct lender that offers fast loan funding, offers funding on a wide variety of commercial real estate properties. They offer special expertise in funding gold mines, medical offices, property conversions, special purpose properties, owner occupied businesses, industrial, auto body repair shops, golf courses, marinas, pawn shops, new residential developments, taverns, hotels and motels, car washes, gas stations, convenience stores, mixed use properties, restaurants, resorts, raw land, mobile home parks, retail centers, equipment and machinery, warehouses, land development, office buildings, self-storage facilities, multi-family projects and apartment complexes.
Better Than Loans understands the delicate intricacies involved in the commercial real estate market and realizes the value in investors purchasing properties while prices are low. Investors should proceed with caution in a volatile real estate market, but they should also consider that there are no gains without risks.