December marked a pivotal shift in the CRE debt landscape, not because of the Fed’s quarter-point rate cut, but due to its unexpected decision to re-expand the balance sheet and inject liquidity into short-term funding markets. As inflation cooled and labor data softened, lenders leaned further into credit selectivity, rewarding disciplined sponsors while continuing to differentiate sharply by asset quality, leverage, and execution risk. The result is a market where capital is available, but only for deals structured to withstand volatility.
At a Glance
Monetary inflection: The Fed delivered a quarter-point cut in December, but markets reacted more to the surprise announcement that it would resume balance sheet expansion, purchasing $40 billion per month in Treasury bills to address short-term funding stress.
Macro backdrop: Inflation cooled materially and labor data softened, reinforcing a gradual normalization narrative, though some data may reflect temporary distortions.
Capital availability: Liquidity remains constructive across lender types, but deployment is increasingly selective, and credit driven.
Asset-class sentiment: Multifamily and industrial remain financeable but are underwritten on current fundamentals; office liquidity remains bifurcated, with CMBS and debt funds leading for financeable assets.
Actionable insight: Structure and execution discipline continue to matter more than marginal rate improvements.
Macro & Monetary Policy Context
Following the December FOMC meeting, Treasury yields moved lower, driven less by the rate cut itself and more by the Fed’s unexpected announcement that it would begin expanding its balance sheet again, purchasing $40 billion per month in Treasury bills. The stated objective is to relieve pressure in short-term funding markets, where SOFR has traded at or near the top of the Fed’s target range since mid-October.
This action signals a targeted liquidity intervention rather than a return to broad quantitative easing. By focusing on short-dated Treasuries, the Fed is attempting to stabilize repo markets without materially altering longer-term inflation expectations.
Inflation data provided near-term support for this posture. November CPI printed at 2.7% year-over-year, below the 3.1% consensus forecast and the lowest annual reading since March 2021. While welcomed by markets and policymakers, some economists caution that shutdown-related distortions may have contributed to the softer print.
Labor market data aligned with a gradual cooling narrative:
November payrolls: +64,000
October payrolls: -105,000, driven by a 157,000 decline in government employment, reflecting deferred impacts of DOGE-related federal workforce cuts
Unemployment rate: 4.6%, above consensus and the highest since 2021
Average hourly earnings: +0.1% month-over-month, bringing year-over-year wage growth to 3.5%
Implication for CRE debt: Lower benchmarks alone are not sufficient to loosen credit. Pricing outcomes remain driven by spreads, leverage tolerance, and asset-level risk assessment.
Capital Source Activity
Agencies (Fannie Mae and Freddie Mac)
Pricing: Approximately 4.95% to 5.45%, with rate buydowns producing effective rates as low as 4.65% to 5.15%.
Capacity: 2026 multifamily volume caps increased to $88B each, materially above expectations and supportive of sustained agency liquidity.
Structure: 35-year amortization remains available for select, experienced sponsors; 50% of volume remains mission-driven.
Life Companies
Pricing: 5.00% to 6.15% for 65% leverage or less, with best execution typically at ~60% LTV or below.
Spreads: Approximately 130 to 225 bps, depending on deal size, leverage, and asset profile.
Posture: Disciplined, long-term capital focused on core and core-plus assets.
Banks
Fixed-rate programs: 3-, 5-, and 7-year terms with step-down prepayment.
Pricing:
Fixed: 5.40% to 6.25%
Floating: ~180 to 300 bps over SOFR (roughly 5.75% to 7.00% currently)
Behavior: Appetite improving with curve normalization, but underwriting remains conservative and relationship driven.
𝗦𝗕𝗔 𝟱𝟬𝟰 𝗟𝗼𝗮𝗻𝘀
Fully amortized fixed rate loans available for up to 90% of eligible project costs.
The December 2025 SBA 504 debenture pricing was completed on December 11, 2025 and resulted in the following pricing:
25 Year Term: 5.82%
20 Year Term: 5.88%
10 Year Term: 5.65%
Debt Funds and Private Credit
Leverage: ~65% to 75% loan-to-cost, focused on stabilized cash flow or credible lease-up stories.
Pricing: 225 to 350 bps over SOFR.
Trends: Increasing selectivity in multifamily and industrial; active preferred equity behind agency senior loans; comparatively strong appetite for financeable office assets.
CMBS Conduit and CRE CLOs
Pricing: 5.75% to 6.75%, depending on asset quality and debt yield.
Structure: 5- to 10-year fixed, up to ~75% LTV, often with full-term interest-only.
Role: Remains a critical execution channel for leverage and IO where balance-sheet lenders are constrained.
Indicative Debt Pricing and Structure Ranges
Capital Source | Indicative Rate / Spread | Leverage / Proceeds | Structural Notes |
|---|---|---|---|
Agencies | 4.95% to 5.45% (buydowns to 4.65% to 5.15%) | Deal-dependent | 35-year amortization for select sponsors; buydowns active |
Life Companies | 5.00% to 6.15% | Up to ~65% (best at ~60% or less) | Spreads ~130 to 225 bps |
Banks | 5.40% to 6.25% fixed; 180 to 300 bps + SOFR floating | Deal-dependent | 3 / 5 / 7-year fixed; step-down prepay |
Debt Funds | 225 to 350 bps + SOFR | ~65% to 75% LTC | Pickier on multifamily and industrial; active pref equity behind agencies |
CMBS | 5.75% to 6.75% | Up to ~75% LTV | 5- to 10-year fixed; often full-term IO |
Outlook & Forward Signals
Markets continue to price one to two rate cuts in 2026, with futures implying roughly a 28% probability of a January cut. While recent CPI softness could open the door to near-term easing, the Fed’s renewed focus on liquidity management suggests a cautious and deliberate normalization path.
Observations
December reinforced a defining feature of the current cycle: monetary easing does not equate to easy credit. While the Fed moved to stabilize funding markets, lenders remain disciplined and highly selective. For borrowers, success hinges on conservative leverage, resilient cash flow, and structures designed to perform across scenarios. In today’s environment, certainty of execution is not optional; it is the asset.
The expert capital advisors at INSIGNIA Financial Services are dedicated to guiding you through evolving market dynamics with expert insight, deep capabilities, and tailored financing solutions. Whether you’re exploring options with banks, agencies such as Fannie Mae, Freddie Mac, and HUD, or debt funds, our team is here to help you secure the best possible terms for your commercial real estate financing.
Ready to discuss your next financing opportunity? Contact us or schedule a consultation today for expert guidance.