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| Jeanne Peck |
Chicago, IL -- Last month's
surprising election
results and the Cubs World Series win are reminders of a changing order.
The
markets quickly reacted by expecting the Trump administration to boost
the economy with domestic job growth and less regulatory constraints.
Investors anticipate an interest rate hike this month barring any
unpredictable global incidents that stymied such actions hikes in the recent
past.
As for last month, treasury rates skyrocketed by more than 50 basis points.
After all the changes in treasuries and mortgage spreads, today's rates are about that same as a year ago. Other comments relating to realty capital
markets as the year-end approaches include: the economy with domestic job growth and less regulatory constraints.
Investors anticipate an interest rate hike this month barring any
unpredictable global incidents that stymied such actions hikes in the recent
past.
As for last month, treasury rates skyrocketed by more than 50 basis points.
After all the changes in treasuries and mortgage spreads, today's rates are about that same as a year ago. Other comments relating to realty capital
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| President-Elect Donald J. Trump |
Steady spreads: Treasury rates rise, but lenders still find value in current
mortgage pricing relative to corporate bonds and other debt options.
Simple
rule... Lenders with full deal pipelines are holding spreads, while those
with lagging production may drop spreads by 10 to 20 basis points in an
effort to increase loan volume.
Underwriting Discipline: Debt funding sources maintain more restrictive
underwriting including debt service coverage, loan-to-value restrictions,
cash out and other items in an effort to comply with regulatory changes
(e.g. Dodd Frank).
rule... Lenders with full deal pipelines are holding spreads, while those
with lagging production may drop spreads by 10 to 20 basis points in an
effort to increase loan volume.
Underwriting Discipline: Debt funding sources maintain more restrictive
underwriting including debt service coverage, loan-to-value restrictions,
cash out and other items in an effort to comply with regulatory changes
(e.g. Dodd Frank).
Should the new administration liberalize financial
institution legislation, expect slightly more aggressive underwriting.
However, equity markets are still clamoring for quality product with
investors more than willing to supplement lower leverage debt with equity
funds.
institution legislation, expect slightly more aggressive underwriting.
However, equity markets are still clamoring for quality product with
investors more than willing to supplement lower leverage debt with equity
funds.
Cooling off: This year record volume of investment sales and financings
tapering off to more "normal" levels as new-construction volume subsides.
Depending upon how treasury rates move, the market will readjust
capitalization rates accordingly, although not proportionally since an
insatiable appetite for quality product outpaces debt costs.
Battle of the "Urbans": Urban vs. suburban CRE investment trends favor
return to select suburbs, particularly infill communities with strong public
transportation linkages and walkability scores. Capital sources warming up
to better profitability in such areas that have been neglected during the
current economic cycle.
The Real Estate Capital Institute(r)'s director, Jeanne Peck, notes,
"Overheated markets are returning to more stabilized levels; but keep in
mind, even with the recent upsurge in interest rates, debt costs continue to
hover near historic lows."
tapering off to more "normal" levels as new-construction volume subsides.
Depending upon how treasury rates move, the market will readjust
capitalization rates accordingly, although not proportionally since an
insatiable appetite for quality product outpaces debt costs.
Battle of the "Urbans": Urban vs. suburban CRE investment trends favor
return to select suburbs, particularly infill communities with strong public
transportation linkages and walkability scores. Capital sources warming up
to better profitability in such areas that have been neglected during the
current economic cycle.
The Real Estate Capital Institute(r)'s director, Jeanne Peck, notes,
"Overheated markets are returning to more stabilized levels; but keep in
mind, even with the recent upsurge in interest rates, debt costs continue to
hover near historic lows."
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