The commercial real estate finance industry has entered 2014 with a renewed sense of confidence. The incautious tone at the first quarter’s outlook conferences belies the industry’s recent history and the losses incurred on precrisis lending activities. Instead, heady predictions of higher lending volumes are being proffered as unequivocally positive signs of better days ahead. More is better in the mundane calculus, and the next year will undoubtedly see more lenders in more places enabling investment by a wider range of borrowers. We are hard-pressed to show serious evolution in our approaches to credit risk measurement. But as long as we ignore that capital flows and the cost and capacity for leverage influence prices and risk-taking, there is no cause for a more prudent analysis.
Read more...The Weakening State of Underwriting | Commercial Observer
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