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| John Oharenko |
Chicago, IL - Declining
oil prices, China followed
by Fed statements are the
order of news impacting capital markets and
keeping mortgage rates
tame. "Fueling" the fire that
sparks low rates,
crude oil prices are the
lowest levels since 2003. China's
economy remains
a mystery with limited
information on recovery prospects. This
news mixture
leads to some of the most
favorable bond rallies in recent history with
ten-year treasuries now
dipping below the 2% range. The benchmark 10-year
note yield is actually
down by about 40 basis points since the Fed announced
a rate hike at the end of
last year.
\
John Oharenko,
advisory board member of the Real Estate Capital Institute(r)
notes, "The mortgage
markets are in for another wild ride this year.
A wide
variety of pricing exists
between quality and more entrepreneurial real
estate funding
options."
Yet again, the real estate
borrowing community benefits from ongoing lower
rates. The likelihood of
rising interest rates may be shelved for the
foreseeable future as
conflicting economic signals hold back the Fed from
taking any further action.
Although benchmark rates
are dropping, Wall Street's mortgage conduit market
suffers unpredictable
pricing gyrations based upon widening yields within
all spectrums of the
capital stack as investment-grade tranches rise more
than three quarters of a
percentage point higher from last year's levels.
This funding sector is now
quoting mortgage rates approaching 5% or more for
long-term debt.
Agencies, life companies
and banks, on the other hand, are on a steadier
path as their sources of
capital are more predictable, tending to price 25
to 50 basis points lower
that conduit lenders, usually because of upon lower
leverage and more
conservative underwriting.
The bottom line for
investors and borrowers alike...lower leverage with cash
flowing deals will
continue to attract the most competitive capital. All
other types of funding
opportunities may require additional enhancements,
guarantees, holdbacks and
other funding restrictions. Leverage is
becoming
more and more of a
"red flag" as capital markets take a break from widening
price gaps and record low
capitalization rates on most types of higher
quality properties.
For a complete copy of the company’s news release,
please contact:
Jeanne Peck, Executive
Director
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