 |
| Jeanne Peck |
Chicago, IL - Real Estate Capital Institute predicdts The Fed is
clearly preparing bond markets for the first rate
hike in nearly a decade.
Investors react
by pricing two- and 10- year
benchmark Treasurys to the thinnest margin since this Spring. With the markets psychologically factoring
such increases,
longer-term bond
investments [including mortgages] will benefit from a slow, predictable pace of
increases mainly based upon tame inflation news.
Even as longer-term
benchmark rates gain more predictability, mortgage market players react
differently to pricing realty risk premiums over these yields. Major players carve out niches as follows:
Life Companies: Without
question, these balance-sheet funding sources win battles on rate, less so
on leverage. Fixed rate loans can be had starting in the higher-3% range.
Virtually all players in this sector have targeted
appetites well above the
amount of deal volume, as investment departments shift more dollars into
commercial realty debt instead of corporate bonds.
Conduits: Relentless volatility hampers Wall Street
from providing consistent pricing as
AAA-pieces of the loan continue to widen to their highest levels in the
year; BBB-piece price widening shows no mercy on the other end of the pricing
spectrum. In fear of wiping out profitability due to mismatched pricing
during loan aggregation, Wall Street sources wait to
the last minute to
finalize loans. Expect more credit
discipline and conservative underwriting
than in the recent past, but higher leverage levels than life companies
with pricing typically starting in the mid-4%
range.
Agencies: Despite wider pricing in recent months,
agencies lead in
higher-leverage
multifamily lending. Agencies have a
generous allocation of
funds for the foreseeable
future. Execution consistency and
continuous
market presence remain the
largest reasons for the continued success of this
funding sector.
Banks: Local and regional banks fill any liquidity
gaps for borrowers in
non-core markets. Flexibility, especially for shorter-term
debt, is the
hallmark funding
characteristic of banks. Pricing tends
to fall somewhere
between life companies and
conduits.
Ms. Jeanne Peck of the Real Estate Capital Institute's Jeanne Darrow
Peck
advises, "keep in
mind-rates are still relatively low, even as spreads
widen." She adds, "The planned Fed actions
reflect a vote of confidence in
the economy, and resulting
mortgage rate impacts should be gradual and work
within project budgeting
goals and objectives."
For a complete copy of the company’s news release,
please contact:
Jeanne Peck,
Executive Director
No comments:
Post a Comment