Every year, the team at Geraci makes predictions about the year ahead and we revisit those at the end of the year. Every once in a while, the market changes in such a way that we also do a mid-year outlook. In May of 2022, I wrote an article on how the rest of 2022 would shape up.
How did I do? Let’s discuss below:
Did interest rates continue to rise?
In May, I stated that there was no question interest rates would rise, and boy was I right. Interest rates increased by 3% (or 300 bps) from when the Feds met in June until the writing of this article (mid-October). Just as glaring, they will continue to rise, as I expect both meetings will increase the interest rates by 1.25% to 1.5% in the next 2 months!
Did interest rates pass through to the private lending market?
I said that you would see continued upward pressure to increase yields on the private lending product. As of the date of this writing, we have largely seen a straight pass through in yield, with an increasing average of 200 bps (2%) across all product segments in private lending, which is squarely in the middle of the 150-300 bps range I gave back in May!
Was there an uptick in Mortgage Fund Creation?
I anticipated that more funds would start in 2022, and I was right! Our Corporate & Securities department has seen double the number of funds than the previous quarter. Funds are coming back due to lenders’ uncertainty about when Wall Street is buying.
Is Wall Street still buying?
I predicted that even though we would see a reduction that Wall Street would continue to buy, which has been the case. Some shops have stopped buying, which we saw, but others have picked up the slack with increased rates and yields. While the market is still uncertain, Wall Street is still around.
Are origination shops still being acquired?
We are still seeing M&A around origination shops being bought up, but this has become much slower as the uncertainty has added complexity into the market. Some people are taking the “wait and see” attitude toward it.
Has owner-occupied returned?
Our longest prediction, Owner-Occupied lending returning, has not yet returned. We shall see how things play out as the year ends.
Was there a record volume of private lending transactions in 2022?
Time will tell, but already we have seen billions of dollars originating from our largest clients. Lightning Docs, our proprietary loan document generator, has generated approximately $1.5 billion in loans since January 2022. It is looking like a record year!