Highly regarded financial advisor Judith McGee had a few thoughts to offer on the current credit market and what she sees as, if at least modestly, improving markets this year. Though cautious on her observations, Ms. McGee points out that money market indicators are showing signs of better times ahead. An important signal to track is the Ted spread (the gap between the rate of the three month Treasury bill and the lending rate banks charge each other). She points to the fact that in November 2008, banks were not lending to one another thus causing the Ted to stretch to 450 basis points, a colossal jump in the wrong direction over a short timeframe. It is currently down around 100 basis points, a vast improvement. The average from 2002 to 2006 was 25-30 basis points, so clearly we have some work to do, but it looks attainable at this point.
From a commercial real estate standpoint, this means that, very slowly, commercial investors can hope to see some lending make a re-appearance in lower risk markets first followed by more troubled areas. Portland is lower risk, though considered a second tier investment market, with our neighbor to the north considered a good first tier investment by many. I’m not sure if we have seen the full effects as a result of Wamu’s collapse (whose 700,000 SF downtown office tower will be vacated) and Boeing’s continued layoffs, which could change the outlook for Seattle.
The story references statistics provided by my partner and I through our quarterly report on the market conditions in Portland and Vancouver. If you are interested in receiving our quarterly report, contact me at kristin.hammond(at)pacific-re.com.
Here’s the article from the DJC – http://tinyurl.com/blpefchttp
