The CRE problem at hand is a cash flow problem as well as a risk problem. Almost all properties are unstable in the current economic climate. There is uncertainty surrounding when net income will become stable and how much that income will be worth i.e. cap rate analysis. This begs the question: When will the economy - and thus real estate - stabilize? Will cap rates be higher than they were entering the crisis? Will fundamental demand for the subject property type have decreased relative to its demand going into the crisis? What effect will this have on market rental rates and ultimately value?
While nobody has a crystal ball, we have discussed these concerns with market participants and understand how to model these issues.
The future changes in lending criteria are uncertain. However, as of January 2021, the Federal Reserve has publicized a commitment to maintaining low interest rates – to as low as 0%. Due to unprecedented government spending in reaction to the COVID-19 stay-at-home orders and resulting steep climb in unemployment, consumer buying power is anticipated to deteriorate – albeit to an unknown extent. The economic effects of such intervention are not expected to be realized until government involvement in the market subsides.
Many economists believe the rapidly expanding Fed balance sheet will result in an inflation spike. Periods of inflation generally translate into an increased desire for tangible assets as an investment alternative. The interaction of these forces as well as the future supply and demand for competitive properties is difficult to project but will likely affect property values.
 Involvement includes investment in equity markets, forbearances, stimulus checks, enhanced unemployment benefits, among others