Wells Fargo Execs On The Future Of CRE, Fintech And The Role We All Play In Boosting Affordable Housing

Wells Fargo is one of the most prominent financial institutions in the world with offices in San Francisco, New York and across the globe. The company has also been the No. 1 commercial real estate lender in the country since 2009, which gives its executives unique insight into the state of the market and where things might be heading in 2022. It also operates a massive home lending practice, and as housing prices have skyrocketed this year, the company has been keeping a close eye on supply and demand. 

On this week’s Walker Webcast, Walker & Dunlop CEO Willy Walker spoke with Kara McShane, an executive vice president and head of commercial real estate at Wells Fargo, and Kristy Fercho, who is also an executive vice president at Wells Fargo and the company’s home lending operations, to see what they think lies in store for the CRE and single-family markets as they head into the new year. 

Walker started things off by asking McShane what her outlook is for CRE in 2022 and beyond. She said that she is bullish about the market’s future thanks to global low rates, the abundance of liquidity in both debt and equity across the capital stack and the record levels of dry powder that is going to continue to fuel investment in CRE.

“I just don't see this slowing down anytime soon, based on the conversations that I have with industry participants and certainly from — you know — the activity that I see in our pipeline,” McShane said. 

She added that while she is as concerned about inflation, as long as the Federal Reserve does not raise rates at an unexpectedly quick or high magnitude, commercial real estate will be fine. 

Moving on to the single-family market, Walker pointed out that the Mortgage Bankers Association said that year-over-year mortgage applications are down 10%, and asked Fercho her outlook for the market as a result. 

She said that the housing market is cyclical, and it has been striking to her to see how steady the market has been against the economic volatility of the last few years. She said the market may exceed $4.8 trillion in originations in 2021, which is even higher than 2020 and something she was not expecting. 

“As we go into 2020, refinancing will taper up as rates rise, but if you look at purchase forecasts from Freddie, Fannie or even Wells Fargo you will see that we’re expecting the purchase market to be at par or even a little bit stronger with what we've seen here,” Fercho said. 

Walker then asked McShane which asset classes she would like to see Wells Fargo clients put money in next year. She said that while there isn’t an asset class Wells Fargo won’t lend on, the company has been trying to increase its exposure to multifamily, industrial and alternative asset classes like data centers. 

The mention of the strong multifamily sector led to a discussion about affordable housing and the challenges surrounding providing an adequate amount for Americans in need. Fercho said that affordability is one of the key issues in today’s market, and the current housing supply and demand imbalance has driven home prices up significantly, further complicating the problem. 

She said that it will take a “proverbial village” of lenders, the White House and more to address the systemic barriers that keep people from getting the housing they need, and there needs to be new politics enacted that specifically work to eliminate those barriers. She added that sustainability will be key — it’s not enough to simply put people into homes, they need to be given the tools to sustain them, which is something that was missing during the last crisis.

“I don't think there's any magic bullet [to solve the affordable housing crisis],” McShane said. “It's that each one of us has a responsibility in the industry to try to achieve these goals and we’re going to continue to do our part.”

Walker closed out by asking what the Wells Fargo team thinks about financial technology and how, given the size and scale of Wells Fargo, they intend to approach this new era of technological advancements. 

McShane said technology is imperative: In today’s world you’re either a disrupter, or you’re being disrupted. 

“If you're not investing in technology and you're not thinking about ways that technology can make your business easier and improve the client experience and increase efficiency, then you’re going backward,” she said. 

While it's more challenging to implement new technology at a large firm like Wells Fargo, she added, it's not too late for large companies to catch up to the tech adoption rates of smaller firms; while that might take longer, it’s a critical thing to do for both the client and employee experience. 

“We need to make our employees’ lives easier,” McShane said. “We need to get rid of the paper and the old ways of processing in order to keep our talent.” 

On Dec. 22, Walker will host Alan Fleischmann with Laurel Strategies. Check here for updates. 

This article was produced in collaboration between Walker & Dunlop and Studio B. Bisnow news staff was not involved in the production of this content.

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