​Based in Wilmette, Illinois, John Hofmann is the senior vice president of KeyBank Real Estate Capital in Chicago, IL. In this role, he plays a pivotal part in originating commercial real estate loans. In an interview, John Hofmann of Wilmette highlighted the impact of economic uncertainty on real estate activity.

Since the COVID-19 pandemic, inflation has become a significant concern in the United States, with notable implications for the real estate market. In 2022, the Federal Reserve approved six interest rate increases, and the trend continued into 2023. Real estate buyers and sellers became skeptical about closing transactions during economic uncertainty.

In the face of interest rate spikes, buyers and sellers have slowed down on completing transactions to give themselves a chance to "rediscover" property values. According to Mr. Hofmann, this temporary pullback makes sense in the middle of a volatile environment. But he also believes that the willingness to close transactions will eventually return when interest rates stabilize.

​A seasoned real estate finance executive based in Wilmette, IL, John Hofmann brings over two decades of experience to his role as senior vice president of KeyBank Real Estate Capital in Chicago. A longtime resident of Wilmette, John Hofmann also shared his insights on the current state of the real estate market in an interview where he talked about the challenges of investing in affordable housing.

Affordable housing remains a matter of economic relevance in the US, as the demand for these housing units outstrips their supply. On average, individuals and families who have applied for affordable housing in the country are having to wait for 18 months to secure anticipated units, according to KeyBank’s affordable housing program manager Al Beaumariage.

Developers in the affordable housing sector navigate through multiple bottlenecks, such as rising construction costs, supply chain disruptions, and erratic low-income housing tax credit rates. Since these projects typically have tight budgets and target low-income markets, these developers are constantly analyzing the impacts of these unpredictable factors on the capital requirements for construction.

Affordable housing projects outside the Community Reinvestment Act (CRA) are also risky because these projects have lower pricing proposals compared to similar projects in the CRA market that invest directly in low- and middle-income communities. In the contemporary conditions of unpredictable prices, projects with low pricing proposals are vulnerable to the budget outstripping expenses, and this questions feasibility.

​Based in Wilmette, IL, John Hofmann is a commercial real estate executive with KeyBank Real Estate Capital in Chicago. Participating in an interview on investment prospects, Wilmette resident John Hofmann pointed to the current “valuation discovery period” as one where market participants are biding their time until interest rates and other market factors settle into more predictable patterns.

One major shift in borrower debt activity he has witnessed is from floating-rate to fixed-rate debt. The latter provide greater certainty, and major corporate real estate participants such as life insurance companies, Fannie Mae, and Freddie Mac are pursuing five-year fixed-rate borrowing strategies. These fill a gap in shorter term lending through delivering prepayment flexibility to borrowers.

Investors have a distinct opportunity to shift from floating rates to fixed rates, refinancing at rates that are both lower than those on existing loans and “more permanent.” At the same time, stable multifamily operators and fund sponsors are looking into preferred equity pathways for deploying capital that would otherwise languish in bank accounts. Preferred equity provides a preference to certain investors compared to common equity and thus carries less risk, but it is still subordinate to debt.