# CRE Debt Market Sentiment: December 2024 - Link: https://johnmorelli.us/cre-debt-market-sentiment-december-2024/ - Published: 2024-12-13T19:02:27+00:00 - Author: John Morelli #### Fed Watch November’s headline and core CPI rose by 0.3%, influencing the Federal Reserve’s strategy on [interest rates](https://johnmorelli.us/commercial-mortgage-rates/). Fed Chair Jerome Powell recently emphasized a cautious approach, stating, _“We can afford to be a little more cautious as we try to find neutral.”_ The odds of a quarter-point rate cut at the next [FOMC meeting](https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm) surged to **99.9%** after the latest inflation report, up from 86.1% earlier in the week. With this rate cut effectively priced in, market sentiment suggests the Fed might pause further adjustments early next year. Swaps traders anticipate over** 80 basis points of easing** in the next 12 months, projecting the Fed Funds terminal rate to hover between **3.5% and 4%**. Track real-time shifts in rate expectations using the [**CME FedWatch Tool**](https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html) to stay informed. #### Life Companies As we approach year-end, life companies are focusing on 2025 allocations. Current quote rates range from **5.55% to 6.45%** for leverage up to 65%. Spreads remain steady between **140-225 basis points**, with the best pricing in the low 5% range for leverage below 60%. Stability in corporate bond spreads continues to anchor LifeCo pricing for alternative investments. #### Banks Banks remain active participants in the lending space as the yield curve normalizes. Current quotes are in the range of **6.15%-6.75%** for assets with stable cash flows and strong tenant profiles. Banks offer attractive fixed-rate programs for terms of **3, 5, and 7 years**, typically with step-down prepayment structures. Floating-rate loans are priced at **275-350 basis points over SOFR**, providing borrowers with flexibility in certain scenarios. #### Debt Funds Debt funds are capitalizing on lower SOFR rates, actively pursuing opportunities in the multifamily and industrial sectors. Borrowers can expect **60%-70% loan-to- cost leverage**, with spreads ranging from **265-400 basis points over SOFR**. Many debt funds are also strategically targeting **preferred equity positions** behind agency senior loans, particularly in multifamily transactions, to maximize returns in the current lending environment. #### CMBS The CMBS market continues to favor **10-year loan terms**, while shorter durations like 5- and 7-year loans remain challenging to price. Rates range from **6.50%-7.50%**, depending on asset quality, loan size, property type, and debt yield. Typical terms include **up to 75% LTV**, often with full-term interest-only (IO) options. While CMBS spreads have shown relative stability in recent weeks, participants are keeping a close eye on both new issue and secondary market trends. #### Agencies Freddie Mac announced a **10-basis-point reduction in spreads** this week, reflecting its commitment to competitive pricing. As of October, Fannie Mae reported $38.5 billion in new business volume (down from $45.7 billion last year), while Freddie Mac recorded $43.7 billion (up from $37.0 billion in 2023). Agency pricing is currently in the range of **5.55%-6.20%**, with rate buydowns emerging as an effective solution for borrowers seeking lower costs. With buydowns, rates can drop to as low as **5.25%-5.65%**. #### Navigating Today’s Market [John Morelli](https://insigniafs.com/john-morelli/) is dedicated to guiding you through these market shifts with tailored financing solutions and expert insights. Whether you’re exploring options with banks, agencies, or debt funds, my team and I are here to help you secure the best possible terms for your commercial real estate financing. Ready to discuss your next financing opportunity? [Contact us](https://johnmorelli.us/contact/) or [schedule a consultation](https://johnmorelli.us/schedule-a-consultation/) today for expert guidance.