Mortgage rates nearly doubled since beginning of year, reaching highest levels since 2007

 

John Oharenko

Chicago, IL –  The Real Estate Capital Institute (RECI) notes September delivered challenging news to the real estate capital markets.  

A strong dollar, return to domestic manufacturing, and low unemployment kept the Fed on edge about taming the economy and triggering more interest rate hikes, leading to a 75-basis-point increase. 

John Oharenko, the Real Estate Capital Institute’s® director, recommends, "this fall's real estate capital markets remain in flux, as investors attempt to understand the Fed's plan for taming inflation."

 

The US stock market officially reached a recession.  Also, multifamily investors witnessed apartment rents dropping from record highs across the country for the first time in nearly two years. 

Conversely, millions of apartment dwellers found financial relief after suffering a barrage of rent hikes during the pandemic. 

 

In addition to interest rate hikes and softening demand, debt investors require higher mortgage spreads to cover the uncertain pricing environment. 

 Mortgage rates have more than doubled since the beginning of the year, reaching the highest levels since 2007.  Investors are preparing for more rate hikes in the coming months, showing signs of hawkish rate expectations. 

 Given the expectations of higher rates, overall mortgage pricing favors longer-term debt of ten years or more, as the yield curve remains inverted.   

 Permanent, fixed-rate debt for ten-year mortgages falls within the 120 to 200 basis point range over benchmark treasuries.  

Within this range, 80% LTV loans with a minimum debt service coverage of 1.25X typically cost 40 to 50 basis points more than 65% LTV loans for apartment properties.  Overall rates translate to about 5% to 6%.  

Also, lenders maintain similar underwriting parameters for shorter-term debt, with comparable-term treasuries hovering approximately ten to twenty basis points higher than longer-term debt. 

 

The Real Estate Capital Institute® 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.  

 

Contact:

 

John Oharenko, 

Executive Director

director@reci.com / www.reci.com

^The   Real Estate Capital Institute^® 

Chicago, Illinois USA 60622

JLL Capital Markets arranges the $27 million construction financing for the 61-unit Onyx on Park apartments in San Diego, CA

 

Olga Walsh

SAN DIEGO, CA – JLL Capital Markets has arranged the $26.9 million construction financing for Onyx on Park, a 61-unit, urban infill multi-housing community located in the Hillcrest neighborhood of San Diego, California.

 

JLL represented the borrower, DiversyFund, Inc. with Highland Construction to secure a 74% loan-to-cost fixed-rate financing package consisting of an $18.95 million senior loan and a $7.96 million mezzanine loan. 

Bryan Clark

The JLL Capital Markets Debt Advisory team representing the borrower was led by Managing Director Bryan Clark, Director Olga Walsh and Associate Daniel Pinkus.

 

“Even in this unusually volatile market, there was an incredible amount of enthusiasm from lenders for this project. In turbulent times, there’s always a flight to quality, and Onyx on Park will be one of the highest quality apartment communities in Hillcrest,” Clark said.

  

Diversyfund selected this combination of lenders due to their ability to provide competitive proceeds and excellent loan terms, including a fixed interest rate to alleviate any interest rate risk during the loans’ co-terminus five-year term.

Daniel Pinkus

With an anticipated completion of Q4 2023, the seven-story Onyx on Park will feature one- and two-bedroom units with an average size of 912 square feet.

 

Situated at 3922-3932 Park Blvd. the site is located four blocks east of the I-163 Freeway in the Hillcrest submarket at the intersection of Park Boulevard and University Avenue.

 

Residents will benefit from immediate access to over 230 restaurants and bars in the Hillcrest epicenter, walkable neighborhood amenities and major employers, including UC San Diego Medical Center, Scripps Hospital and SPAWAR.

  

For more news, videos and research resources on JLL, please visit our newsroom.

 

CONTACT:

Jenna Sharp

JLL

M +1 214 394 3356

JLL.com

 

www.DiversyFund.com