Moody’s Analytics’ Kevin Fagan On Why CRE’s Outlook May Not Be So Grim

Moody’s Analytics Head of CRE Economic Analysis Kevin Fagan

On this episode ofBisnow Reports, we sit down with Kevin Fagan, the head of CRE economic analysis at Moody’s Analytics, to hear his thoughts on the Federal Reserve’s approach to interest rates in the future, the outlook for the commercial mortgage-backed securities market, how much exposure real estate has to regional banks and the former Signature Bank‘s $11B in multifamily loans that have yet to find a buyer.

Although he said the real estate market would experience some pain and distress, he stressed that the credit conditions are far better than they have been in previous downturns.

“It’s a boom-bust sector,” he said on the episode. “It’s very pro-cyclical, and it moves with the economy. It’s the physical manifestation of the economy, and as the economy goes, so does commercial real estate. Let’s say we had the same thing [that] happened in 2008 happen now: There was contagion all over the place, all the levers of liquidity stopped being available, and in CMBS, we had a 10% default rate. … You could very much argue it would be better this time if we had the same contagion happen now because you have better metrics.”