Episode Summary:
In this episode of Real Investor Radio, Craig Fuhr and Jack BeVier discuss various aspects of the current investment landscape, focusing on DSCR loan pricing, the influence of the five-year treasury, and the implications of recent Fed actions on liquidity. They explore the state of different asset classes, including office and multifamily properties, and provide insights into the single-family market. The conversation emphasizes the importance of being cautious and strategic in investment decisions during a time of market uncertainty.
Episode 106 Overview
Borrowers often expect Fed cuts to lower DSCR loan pricing immediately. However, Wall Street indexes most DSCR rate sheets to the five-year treasury. Accordingly, daily treasury moves can change pricing faster than Fed meeting headlines.
Why the Five-Year Treasury Matters
DSCR loans may be written for 30 years. Even so, investors often refinance or sell much sooner. As a result, the weighted average payoff timing trends near five years. Jack links this behavior to constant prepayment rate logic. Therefore, the five-year treasury becomes the practical reference point for DSCR loan pricing.
Why Fed Cuts Don’t Translate One-to-One
Craig notes a 25-basis-point Fed cut still triggers next-day borrower calls. Jack explains that markets price expectations in advance. In other words, traders adjust treasury yields on news, forecasts, and sentiment. Consequently, DSCR loan pricing reacts to treasury movement, not the Fed announcement itself.
Repo Activity and What It Signals
Craig raises a report about the Fed injecting liquidity through repo operations. Jack describes banks seeking short-term liquidity at the Fed window. Although this may be true without panic, it still signals tighter cash conditions. Moreover, it suggests the Fed feels more recession risk than inflation risk.
Bank Bond Losses and Accounting Pressure
Craig adds that banks hold older, low-rate bonds below par today. Typically, banks avoid recognizing losses by labeling bonds “held to maturity.” However, pledging bonds for liquidity may force mark-to-market treatment. As a result, some banks could report meaningful losses, similar to dynamics seen in past bank stress.
Investor Caution
They also discuss large pools of cash sitting on the sidelines. Craig cites big institutions holding unusually high cash levels. Jack argues that softening prices create tempting “shiny objects.” Nevertheless, buyers can still misjudge refinancing assumptions and future debt availability.
Office Outlook Depends on Quality
Jack avoids sweeping claims because he does not invest in office. Even so, he sees a split: Class A may hold up better. In contrast, B and C office may face longer-term obsolescence. Therefore, recovery may not arrive evenly across the sector.
Multifamily Enters a Workout Phase
Jack says multifamily sits “thick in it” with workouts and capitulation sales. He sees more deals with operational issues or strained capital stacks. Additionally, some sellers pitch debt assumptions or near-zero equity transfers. This wave, he suggests, could create opportunities into 2026.
Single-Family Softens, So Underwriting Must Tighten
Jack expects softer pricing due to affordability pressure and elevated mortgage rates. Accordingly, he avoids underwriting appreciation for 2026. He also warns against using stale comps from six months ago. For that reason, he pushes investors to read weaker nearby comps as real market signals.
Closing Takeaway
All in all, the episode urges discipline. Track the five-year treasury to understand DSCR loan pricing shifts. Then, stay patient and selective while markets reprice across asset classes.
