Overall Mortgage Price Remains Tight, Says Real Estate Capital Institute

John Oharenko

Chicago, IL - The final quarter of 2017 begins with

interest rate expectations seen earlier in the year.  Investors are hoping

for more normalized conditions less prone to shocks from global politics and

natural disasters.  Considering such conditions, realty finance trends

revolve around benchmark yields, risk pricing and liquidity, as discussed

below.

Benchmark Yields:  With longer term treasuries floating in the

2.25%-or-greater-range. Fed watchers expect inflation at about the same

level, approximately 2.5%.  Many hope the economy will run along a steady

pace without any inflation fuel.  The Fed's objective focuses on reducing

the $4.5 trillion balance, with as many as four quarter-point rate hikes

during the next two years.  Consequently, mortgage pricing expected to

steadily climb as well.

Risk Pricing:  Overall mortgage pricing remains tight, as a wide spectrum of

lenders compete for long-term permanent loans within a historically narrow

range of 3.5% to 5%+ for funding traditional property types.  Higher-risk,

value-add perm loans generate pricing still below the double-digit range.

Mezzanine, preferred equity and other "stretch" debt is freely available,

directly competing with lower-yielding equity returns - often in the

higher-single-digit to lower-teens range.

Liquidity:  For any reasonable quality cash-flowing asset, funds are readily

available from multiple sources.  With realty capital liquidity at peak

levels, agencies, LifeCos, banks, conduits and debt funds abound. Agencies

demand loans as year-end goals need to be met, so multifamily borrowers

enjoy the best loan terms of any asset class.  LifeCos comfortably meet

funding objectives, with additional capital allocations available for next

year.  However, the need to "reach" for deals is less prevalent for this

year, as 2018 goals will be announced.  Banks cautiously monitor HVCRE

requirements, but still need deal flow for profitability. Wall Street

tightens spreads as to more selective buyer pools seek higher-quality

offerings.  Debt funds lurk at the upper end of the yield curve, taking on

construction and value-creation transactions.

Mr. John Oharenko, Director of The Real Estate Capital Institute(r),

suggests, "While expectations are for more Fed rate hikes during the next

two years, the need to do so is limited.  Global uncertainly, and other

events such as natural disasters, drive debt markets more than economic

policies."

For more information on this press release, please contact:

John Oharenko, Executive Director

Real Estate Capital Institute,

3517 West Arthington Street

Chicago, IL USA 60624

director@reci.com