Rates Up, Prices Down
February 23rd, 2023
The rapid increase in interest rates over the previous 3 quarters have brought uncertainty and disconnect throughout the CRE world. Sellers want the prices of early 2021 and Buyers to want the cap rate to interest rate spread to return to norms of around 200 bps for your average property. You can make a better return on a government money market than you can on a 15-year Starbucks and the money market is ultra-liquid and relatively risk-free. What’s the answer? Buy at prices that manage your debt ratio and slowly over 3 or 4 quarters pricing will start to align with interest rates again. All we need is a steady rate….
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