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| Jeanne Peck |
Chicago, IL, Nov. 3, 2014 - In the past
couple of weeks, mortgagerates dropped to their lowest level since earlier in the summer, only to rebound upward by about over quarter percent after the stock markets rallied to their best levels in over a year.
Global anxieties overshadow an improving American economy, keeping bond yields near record-low territory.
Instant volatility prevails ignited by any news outbreak such as the MiddleEast, Ebola and Russia, rattling Treasurys by 10 to 20 basis points in within a day.
Instant volatility prevails ignited by any news outbreak such as the MiddleEast, Ebola and Russia, rattling Treasurys by 10 to 20 basis points in within a day.
"Uncertainty prevails, but low interest rates are
definitely supporting a strong real estate market." says Jeanne Peck of the Real Estate
Capital Institute(r).
On the other side of the equation, mortgage spreads keep declining from their historical norms. Currently spreads are about ten to twenty basis points narrower than the averages for the past three decades.
On the other side of the equation, mortgage spreads keep declining from their historical norms. Currently spreads are about ten to twenty basis points narrower than the averages for the past three decades.
The
outlook for commercial real estate mortgages is strong despite erratic Treasury note
behavior. A stronger domestic economy is definitely buoying commercial
property fundamentals, generating a very narrow mortgage pricing band across
multiple asset classes. For instance, equally-leveraged office properties
trade only about five basis points wider than multifamily assets; Industrial
and retail rates are nearly equally priced. Only a month ago, the rate
premiums between various property types varied as much as ten basis points.
Quickly tightening mortgage spreads occasionally create unique yield
inversions, as many investors are caught off guard. In some cases, the
mezzanine and preferred equity tranches actually priced lower than the
higher-risk components of senior debt. Freshly-priced mezz/pref equity
funds were blended with older, higher-priced senior debt lining up for
securitization.
property fundamentals, generating a very narrow mortgage pricing band across
multiple asset classes. For instance, equally-leveraged office properties
trade only about five basis points wider than multifamily assets; Industrial
and retail rates are nearly equally priced. Only a month ago, the rate
premiums between various property types varied as much as ten basis points.
Quickly tightening mortgage spreads occasionally create unique yield
inversions, as many investors are caught off guard. In some cases, the
mezzanine and preferred equity tranches actually priced lower than the
higher-risk components of senior debt. Freshly-priced mezz/pref equity
funds were blended with older, higher-priced senior debt lining up for
securitization.
Even all of the market instability, 2014 will shape up to be a record-year for the industry. An ever-expanding list of capital sources continue to look
for funding opportunities as mortgage yields are still relatively attractive in relationship to corporate and government bonds.
Nearly all
institutional investors now view mortgage debt as a legitimate investment vehicle as securitization data provide clear yield and performance benchmarks.
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. Furthermore, call the Real Estate Capital RateLine at
7RE-CAPITAL (773-227-4825) for daily rate updates.
For a complete copy of the company’s news release, please contact:
The Real Estate Capital Institute(r)
3517 West Arthington Street
Chicago, Illinois USA 60624
Contact: Jeanne Peck, Executive Director
www.reci.com
