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| John Oharenko |
Chicago, IL -- Chicago-based Real Estate Capital Institute (RECI) finds recent financial market developments resulting from
trade wars, global instability and a cooling economy are
Such favorable
interest-rate news Add captionhelps mortgage rates stay inborrower-friendly
pricing territory.
Proof of low rates
is most clearly illustrated by current benchmark ten-year
treasuries priced
at 30 basis points lower this month compared to November's
peak level.
This rate almost mirrors April pricing, except for short-term
rates, which are
now nearly 50 basis points higher. And compared to the
some of the best
rates seen this decade (Summer of 2016), overall pricing is
about 125 basis
points higher -- still relatively attractive by modern
historical
standards. As is the trend for quite some time, long-term debt
continues to be
the most attractive funding option vs. short-term loans.
market news
include: (1) Agencies comfortably hitting their annual
multifamily
production targets; (2) HUD guidelines for speeding up
processing of Low
Income Housing Tax Credits; (3) Life companies meeting their
lower-leverage funding goals well before yearend, (4) Banks
maintaining strict
underwriting discipline on construction lending and (5)
Debt funds moving
into the more competitive pricing arena in direct
competition with
mortgage conduits.
stack, including
debt and equity. Yields are compressed and risk-adjusted
pricing is in
record-low territory. Fears of loosening underwriting
standards are
mitigated with more investor equity than witnessed in previous
financial
cycles. Lenders carefully compete on pricing instead of higher
leverage, as
evidenced by converging perm loan underwriting among conduits
and debt fund players.
The Real Estate
Capital Institute's director, John Oharenko, stresses,
"Lenders are
already starting to dip into their 2019 funding allocations,
especially life
companies. Some lenders avoid quoting new deals until their 2019 budgets are
soon finalized."
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