“If you’re a broker, if you’re a lender, if you’re an investor, you need to underwrite differently than you did before,” Hornik said. “You can’t just go in and say, ‘Oh, this is how it’s going to pencil out.’ Because your costs are going up.”
He also noted the ongoing battle between the Trump administration and the Federal Reserve, as the Fed continues to delay possible rate cuts for fear of rising inflation.
“Having been alive during the 70s, there’s nothing worse than an economy that has rising prices and slowing growth,” he said. “It’s a spiral down. But thus far, inflation seems to be coming down in check. My prediction, and it’s just my prediction, we’re going to see more cuts than are currently priced into the market, which is good for everyone in the room.”
Liquidity is the key
One of Hornik’s main themes was encouraging lenders to keep liquidity in mind when planning future business. He said improved liquidity starts with the Federal Reserve.
“Cheaper money raises transactional activity, which means there’s more movement and more deals to be done,” Hornik said. “But it all starts with the Fed and the overnight lending rate to add liquidity to the marketplace.”