 |
| John Oharenko |
Chicago, IL --- With rising rates in the forefront of
headline news, underwriting percent figures
re-emerge as hot discussion
topics as the 10-year treasury note hit a four-year high earlier last
month. Noteworthy percent benchmarks include:
"2%-3%" - As the US economy enjoys seven years of prosperity, recessionary
fears are nowhere in the foreseeable future. Record-low unemployment not seen in more that fifteen years, accompanied by strong consumer spending and controlled inflation (about 2%) assures favorable economic conditions in the foreseeable future.
topics as the 10-year treasury note hit a four-year high earlier last
month. Noteworthy percent benchmarks include:
"2%-3%" - As the US economy enjoys seven years of prosperity, recessionary
fears are nowhere in the foreseeable future. Record-low unemployment not seen in more that fifteen years, accompanied by strong consumer spending and controlled inflation (about 2%) assures favorable economic conditions in the foreseeable future.
The Fed's new chairperson will make fighting inflation
a top priority, so rising benchmark [and mortgage] rates are in store with
the 3%-plus-level to reappear for 10-year treasuries. European and Asian
markets are also strong, with economists expecting over 3% growth worldwide.
"4%-5%" - Mid-single-digit rates are back in the spotlight for longer-term,
permanent debt. While lower four-percent-handle rates are still available
for more conservatively funded loans, 5% rates are appearing more often -
usually for higher loan proceeds - not regularly seen since 2011.
"25%" - Energy conservation measures can really be profitable, not only
because of lower expenses, but because of lower rates. Twenty-five percent
energy or water bill savings equate to agency multifamily pricing discounts
that can also be a quarter percent or more.
"125%" - As mortgage rates climb, and capitalization rates remain low, debt
service coverages of 125% or more drive loan proceeds. Loan-to-Value ratios
are important, but lenders demand cash flow coverage to drive deals within
stated underwriting objectives.
However,
record-low capitalization rates
should continue to benefit sellers, as buyers are still highly motivated to
purchase quality realty assets due to limited supplies in prime locations.
150% or more debt coverage attracts the best pricing, especially with life
companies. On the flip side, long-term, self-amortizing loans backed by
credit income approach coverage closer to breakeven levels.
should continue to benefit sellers, as buyers are still highly motivated to
purchase quality realty assets due to limited supplies in prime locations.
150% or more debt coverage attracts the best pricing, especially with life
companies. On the flip side, long-term, self-amortizing loans backed by
credit income approach coverage closer to breakeven levels.
The Real Estate Capital Institute's(r) director,
John Oharenko, comments, "Percent figures are always important
barometers to watch in realty finance. It's a numbers game that quickly quantifies
lender and borrower risks/reward expectations."
The Real Estate Capital Institute(r) 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.
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.
For more information, please contact:
The Real Estate Capital Institute(r)
3517 West Arthington Street
Chicago, Illinois USA 60624
Jeanne Peck, Executive Director
<mailto:director@reci.com
No comments:
Post a Comment