It’s not unusual for senior housing/healthcare lenders to do whatever they can to help borrowers in timing dodgy financial markets, but the task isn’t getting any easier.
“The problem when working with popular HUD Lean financing programs is accounting for the gap between the time when a borrower applies for a loan and when the rate can be locked in at closing. It can take six or more months for the loan to clear all the processing hurdles,” says Cambridge Realty Capital Companies Chairman Jeffrey A. Davis.
“When the year began, the expectation was that the economy would continue to improve and interest rates would finally be on the rise again in 2016. Now the financial markets appear to be betting heavily that the Fed will not raise rates again until 2017, maybe later,” he said
Cambridge is one of the nation’s leading senior housing/healthcare lenders, with more than $4.5 billion in closed transactions. The company has consistently ranked among the top FHA-approved HUD lenders.
Mr. Davis points out that a number of economists have been warning that the whole world may be turning Japanese. That is, weak demand and a bias toward deflation could be enduring problems.
For example, New York Times columnist Paul Krugman says that until recently, investors acted as if they still expected a return to what we used to consider normal conditions. “Now they’ve thrown in the towel, in effect conceding that persistent weakness is the new normal.
“What this means is low short-term interest rates for a very long time – and low long-term rates right away. Many people don’t like what’s happening, but raising rates in the face of weak economies would be an act of folly that could push us back into a recession,” he said.
Fed Vice Chairman Stanley Fischer believes there’s still reason for optimism about the economic outlook. Since the very bad data we got in May on employment, most of the incoming data has looked good, he observes.
However, the central bank has repeatedly underscored the fact that it would need to accumulate sufficient evidence to increase their confidence that economic growth was strong enough to withstand a possible downward shock to demand. What this apparently adds for senior housing/healthcare owners and operators is an extension of cheap money for rehab projects and new construction, Mr. Davis said.
