I am tired of listening to the economic nightmare we are enduring compared to the GFC. Everyone is reaching for the GFC comparison, and it is the wrong reference. In 2007 the leverage sat on bank balance sheets where regulators could count it. Now it sits in private credit funds that mark their own loans and in securitizations that price off forward flow. 1929, 2000 and 2007 will read like child’s play.
Data providers never tell you what is coming. They surf. They ride the wave up, they ride it down, and they pivot the moment the direction is absolutely clear. If you were on the Titanic, they would have pivoted around the time you could no longer hear the band. The water had reached it.
So I opened Trepp’s latest report expecting a signal that had just popped. It had not. The signal is the share of lending going to acquisitions rather than refinancing, and Trepp says that when it approaches 30%, buyers have stopped paying for current income and started paying for momentum. It flashed across every major property type in 2007. It went off again in 2021 in multifamily and lodging, at levels never before seen in the dataset.
In multifamily the share hit 47% in 2021 and peaked at 50% in 2022. Look further back and it first popped in 2017 at 31%.
The headache has arrived.
