Mortgage markets are plagued by Wall Street (top right photo) market malaise and swooning prices, yet as far as commercial real estate debt is concerned, overall default rates and profit performance remain at historically favorable levels.
Funding sources and borrowers alike are very selectively funding and acquiring projects as re-pricing opportunities emerge in the wake of one of the nation’s worst financial crisis.
Dramatic market volatility created by major financial institutions failing along with selective governmental bailouts, wrecks havoc with real estate capital markets with some key trends developing, including:
--Skyrocketing Libor pricing (with rate premiums) now closely reflects domestic Bank Prime rates.
--Funding availability is the primary factor within the lending sector, surpassing pricing and leverage as key variables.
Mortgage pricing is, at best, a “guessing game” as many lenders remain on the sidelines.
Nevertheless, overall mortgage pricing for different types of is shown below based on the most common commercial property types graded by Credit and Class A-B-C subcategories: (Chart source at right: Real Estate Capital Institute)
According to Jeff Davis, advisory board member of the Real Estate Capital Institute, “Except for select Agency programs such as FHA/HUD, most funding sources are waiting for more clear market signals for the remainder of the year.”
He adds, “Active lenders seem to have met their allocation goals as funds continue drying up within the securitized lending sector.”
The Real Estate Capital Institute® is a volunteer-based research organization that tracks realty rates data for debt and equity yields. The Institute posts daily and historical benchmark rates including treasuries, bank prime and LIBOR. Furthermore, call the Real Estate Capital RateLine at 7RE-CAPITAL (773-227-4825) for hourly rate updates.
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