Real Estate Capital Institute Reports China’s Mystery Economy Keeping U.S. Mortgage Rates Tame

John Oharenko

Chicago, IL - Declining oil prices, China followed

by Fed statements are the order of news impacting capital markets and

keeping mortgage rates tame.  "Fueling" the fire that sparks low rates,

crude oil prices are the lowest levels since 2003.  China's economy remains

a mystery with limited information on recovery prospects.  This news mixture

leads to some of the most favorable bond rallies in recent history with

ten-year treasuries now dipping below the 2% range. The benchmark 10-year

note yield is actually down by about 40 basis points since the Fed announced

a rate hike at the end of last year.

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John Oharenko, advisory board member of the Real Estate Capital Institute(r)

notes, "The mortgage markets are in for another wild ride this year.  A wide

variety of pricing exists between quality and more entrepreneurial real

estate funding options."

Yet again, the real estate borrowing community benefits from ongoing lower

rates. The likelihood of rising interest rates may be shelved for the

foreseeable future as conflicting economic signals hold back the Fed from

taking any further action.

Although benchmark rates are dropping, Wall Street's mortgage conduit market

suffers unpredictable pricing gyrations based upon widening yields within

all spectrums of the capital stack as investment-grade tranches rise more

than three quarters of a percentage point higher from last year's levels.

This funding sector is now quoting mortgage rates approaching 5% or more for

long-term debt.

Agencies, life companies and banks, on the other hand, are on a steadier

path as their sources of capital are more predictable, tending to price 25

to 50 basis points lower that conduit lenders, usually because of upon lower

leverage and more conservative underwriting. 

The bottom line for investors and borrowers alike...lower leverage with cash

flowing deals will continue to attract the most competitive capital.  All

other types of funding opportunities may require additional enhancements,

guarantees, holdbacks and other funding restrictions.  Leverage is becoming

more and more of a "red flag" as capital markets take a break from widening

price gaps and record low capitalization rates on most types of higher

quality properties.

For a complete copy of the company’s news release, please contact:

Jeanne Peck, Executive Director

director@reci.com

www.reci.com