WASHINGTON, DC—Add another data point to the growing pile of anecdotal evidence that this real estate cycle is heading for closure. The Real Estate Roundtable's latest quarterly Sentiment Survey highlights a significant drop in future expectations. Namely, the future conditions index component has fallen 11 points to 56 year over year.

Most survey respondents said they expect stable asset valuations over the coming year. However anecdotal comments reflected concerns about capital costs going up, and the potential for a "moderation" or "correction" in real estate values. "There are concerns about global instability, rising interest rates, and the sense that growth opportunities may be getting harder to find at this stage in the cycle," Roundtable CEO Jeff DeBoer said in a prepared statement.

To be fair, the overall index clocked in at a respectable 61, with investors pointing to the relative strength of the US economy and strong real estate fundamentals.

Still, though, doubts about the sustainability of these trends were apparent in the comments.

One commenter said that "the solid operating fundamentals and high valuations in the real estate sector somehow feel tenuous in the face of seemingly endless external threats" such as Greece, Puerto Rico, the Chinese bubble, US Federal Reserve policy, the Middle East and Russia.

Another wondered how much of the appreciation in asset values is attributable to improving fundamentals versus the artificially low interest rates and the relative attractiveness of the US compared to other world markets. "Although there seems to be no specific threat on the horizon, I fear we are susceptible to an externally driven change that could materially reverse the progress of the past few years," this person said.

A third came to a similar conclusion: "The US economy has relative strength in comparison to a much weaker international world."

The End of the Cycle

A number also spoke about the end of this current cycle.

Said one: "The hyper-competitive transactional activity currently in the marketplace is perhaps an indication that we are in the later stages of the cycle. There are less opportunities and too much many chasing deals. Any downside risk is to some extent mitigated by the amount of capital in the market."

Another advised that "this is a good time to prune the portfolio of any assets that you don't want to hold through the next cycle." And

"The amount of capital in the market seems to overwhelm the number of attractive opportunities."

Tighter Lending, More Expensive Debt

The survey is the latest indicator that a shift is underway in the industry.

Last month a majority of commercial real estate lenders predicted that new lending will peak for this cycle in 2016 or 2017, according to the Spring 2015 RELA-Chandan Survey of Commercial Real Estate Lender Sentiment. Unless the survey results prove to be an outlier, Sam Chandan, president and Chief Economist of Chandan Economics, told GlobeSt.com at the time, "we can foresee a period of significant economic stress -- a recession -- at some point during the next three or four years."

This tightening was highlighted in the latest National Multifamily Housing Council Quarterly Survey of Apartment Market Conditions, which came out last month. Respondents' view of multifamily mortgage borrowing is considerably dimmer than it was three months ago.

The survey's debt financing index declined from 60 in late April to 35 now. A reading below 50 indicates that borrowing conditions are worsening; the council says this is the first time the debt financing index has fallen below 50 since January 2014.

"The decline in the debt financing index is significant," says Mark Obrinsky, NMHC's SVP of research and chief economist.

How One Originator Is Navigating the Landscape

None of this has gone unobserved, of course -- not by investors, not by borrowers and certainly not by lenders and originators. During Walker & Dunlop's earnings call for the second quarter, CEO Willy Walker addressed the issue head on. His explanation, as you will see, shows that parsing signs that may or may not suggest a cycle is maturing is not an easy thing to navigate.

"A consistent question from investors and clients alike is 'where are we in the cycle?'" Walker said during the call. "Cap rates have compressed significantly, making many question whether prices for commercial real estate assets have gone too high, while record per unit and per square foot prices are clearly signs of a heated market."

The saving grace for most markets is that there is still limited supply of new product across the country, he said. "Generally speaking the slow growth recovery has kept new construction at a moderated pace which means a broad glut of new supply is unlikely over the next few years."

Of course, then the next issue to attack is whether the amount of capital exceeding demand is forcing lenders to make overly aggressive loans.

Here, too, Walker seems relatively sanguine about things.

Although the market we operate in is highly competitive we have not yet seen the leverage levels or low debt service coverage levels that appeared in 2006 and 2007 that acted as catalysts to the last downturn, he said. So take that, Roundtable commenters!

Well, actually not. Even Walker says it is clear is that there will be a market downturn sometime and "likely due to something nobody sees coming."