Tuesday, May 3, 2016

Real Estate Capital Institute Reports Low Mortgage Rates for Investors Still on Table But Could Shoot Up Quickly as Economy Improves

Jeanne Peck
CHICAGO, IL – Real Estate Capital Institute reports the economy remains kind to real estate investment as it continues to foster low mortgage rates.  Working against
low rates is the U.S. economic outlook, which is improving as deflationary
concerns ease.  Steadily climbing oil prices combined with reduced fear of a
Chinese economic meltdown gives the Fed enough ammunition to raise rates
again.  In favor of low rates, the less-volatile conduit market appears to
maintain pricing (investment grade CMBS spreads back to mid-November) levels
but at a cost: meager volume.

The net effect?  Not much rate movement, only about a quarter percent
increased during the month.  Investors pay attention to other more pressing
issues such as:

*    "High conviction" investing:  Really focus on a very specific
investment strategy and stay liquid to cover downside risk.  Investors are
pickier and rely on more on long term vs. build-and-flip strategy; they are
prepared to own thru a downturn.

*    More fluid supply & demand dynamics:  Overbuilding, for example, is
less of an issue if projects serve highly-targeted consumer needs such as
Transit Oriented, senior living, Hispanic grocer.

*    Black Swan: increased concern about the higher frequency of events
beyond investor control (terrorism, global instability).  Cybersecurity is
notable in the list of such concerns as many fear moving too quickly into
the e-commerce "unknown."  For example, owners experiment to find the
optimum mix of online and bricks and mortar retail space to stay relevant in
addition to "experiential" shopping.

*    Lower returns:  Healthier economic system governed by stricter
regulations and less consumer debt - allowing lower/safer overall returns.
Foreign and domestic private investors flock to both debt and equity, more
flexible funds not hampered by regulations or rigid yield thresholds.

*    Affordability:  Developers can't build enough workforce and
affordable rental housing -  a key focus with agency lenders and communities
offering investors pricing discounts, tax breaks, more density bonuses. 

Jeanne Peck, director of The Real Estate Capital Institute(r), warns, "The
ride is smooth now, but keep your seatbelts fastened for some turbulence
ahead."  She adds, "Low yields are acceptable, as long as the domestic and
global economies stay in sync."

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

Jeanne Peck
 Executive Director

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