1. INTEREST RATE IMPACT ON BANK SECURITIES AND CAPITAL
• After recent distress in the banking sector, there is a risk that many of the small and mid-sized banks
that hold the bulk of US commercial real estate loans may see a credit crunch, dampening liquidity in the
sector.
• According to Goldman Sachs, roughly 80% of all bank loans for CRE come from regional banks, which
are most likely to see a tightening of credit and lending standards following the collapse of Silicon Valley
Bank.
• CRE fundamentals remain strong relative to the broader US economy. Still, any upcoming refinance
activity must factor in higher interest rates and the shifting demand profiles of CRE sectors. This will be
of particular concern for low-interest office loans coming due, which will have to contend with higher
rates and lower long-term demand.
2. 2023 SCE HOUSING SURVEY
• Households are increasingly expecting home price growth and rents to decline over the near term,
according to the New York Fed’s latest Survey of Consumer Expectations Housing Survey.
• Households expect home prices to grow by 2.6% over the next 12 months, down from 7.0% one year ago.
Current forward-looking sentiment, which relies on survey data taken in February, is the lowest since the
regional bank started conducting the survey in 2014.
• On the other hand, five-year forward expectations rose to 2.8% from 2.2% last year.
• Rents are expected to increase by 8.2% over the next 12 months, which is still a robust estimate, but is
down from 11.5% last year. Meanwhile, renters place their probability of owning a home in the future at
44.4%, a tick up from the 43.3% registered one year ago.
• Respondents expect mortgage rates to rise to 8.4% one year from now and 8.8% in three years
