Recession ‘Technically’ Over

By Ben Barker, McQuaid Associate Broker

Fed Chairman Mr. Bernanke recently stated that the recession is technically over, on the basis that some economic indicators are stabilizing and beginning to recover. What does this mean to apartment investors? Directly: not much. Indirectly: a lot. While these indicators don’t have immediate effects on income which will impact rental income, it does equal an effect on speculation. Many investors have been staying on the sidelines waiting for the ‘Distressed Deal.’ The idea that the recession is over and the bottom may have passed means that investors need to start looking for their deal, distressed or not.

These investors will, if they are true buyers, become active shortly. The record low interest rates coupled with the time of the year will result in a frothy market. By time of the year, I mean that to close a deal in 2009 – investors must have it under contract in October, since the average time to close is approximately 10 to 12 weeks. Additionally, whenever interest rates are at the same level as the true cap rate – it is a good time to buy. Interest rates and cap rates have been hovering at the 5-6% range for urban desirable areas.

Therefore, if there are Buyers who wish to take advantage of down market and banks that have begun to look for borrowers with an increase in capital, lowered spreads and thawing in lending criteria, they must act quickly – for the year is quickly coming to a close and it is only a matter of time before the buy side becomes competitive again.