Lumber futures are dropping back towards early 2020 levels, as the extent of the real estate downturn becomes clear.
Last week, BREIT announced it was limiting redemptions, triggering a spate of warnings around privately held, illiquid assets. At the same time, as has been pointed out in numerous articles, Blackstone has a withdrawal limit that will help to prevent a fire sale of assets.
Nevertheless, the underlying valuation of property portfolios may have further room to fall. The boom in logistics and multifamily US residential real estate is coming to an end as rates rise.
Multifamily developer confidence fell significantly in the third quarter, according to the NAHB. At the same time, the number of new privately owned housing units (5 or more) under construction hit a record 910k in October (start of the series in 1970). Rental rates are set to fall, putting pressure on rental yields.
BREIT’s withdrawal limit has brought renewed attention to other areas of private markets, including credit and BDCs. BDCs have invested heavily in software, but more companies in this sector are now warning that its customers are laying off workers, delaying hiring and slashing expenses in areas such as marketing.
Credit will continue to tighten as the Fed pushes rates above 5%. According to the latest Credit Managers’ Index, “NACM member respondents are indicating credit deterioration with more accounts going beyond terms or being referred to collections. Disputes and customer deductions are now reflecting both dissatisfaction because of delayed deliveries as well as inability to pay.
