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

director@reci.com

www.reci.com