#Multifamily Loan Rates Find New Lower Floor

Apartment Building Investment Loan sets lower floor for rate.
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Both the 10yr and 15yr apartment building investment loan rates we track fell to lows not seen but for just one week last year and they’ve remained there for five weeks. The 10yr rate dropped 13 basis points to 4.25% and has stayed there since Sept. 14. Likewise the 15yr loan (see below for details on the loans we track) also fell 13bp to 4.375% where it has remained from the middle of September on.

Outside of that one single week last year when Continue reading #Multifamily Loan Rates Find New Lower Floor

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Fed Chair Yellen- Maybe we are turning Japanese

Actual and Expected Inflation in Japan
“Here, Japan’s recent history may be instructive: As shown in figure 9, survey measures of longer-term expected inflation in that country remained positive and stable even as that country experienced many years of persistent, mild deflation.” – Janet Yellen Sep. 24, 2015

Was talking about this just last week (again):

As a value guy like you it’s hard to figure out how buying something in the sixes on cap rate works out to be a good deal. But what if the Fed is trapped at the Zero Lower Bound and we are turning Japanese? Their ‘Lost Decade’ is now old enough to graduate with a Master’s degree and we’re following the exact same playbook. I offer last week’s Fed decision as exhibit #1. They would dearly love to raise rates just to prove they can but there’s just thin ice between us and

Continue reading Fed Chair Yellen- Maybe we are turning Japanese

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Apartment & CRE Lending Today- great charts from MPFResearch

Apartment Building Investment and Commercial Real Estate Lending Today
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Great set of charts on apartment building investment loans vs. CRE and development lending. If recency bias has you thinking bubble check in with the demographics which show millennials are the largest population group in the country and 30% of them are still in their parents’ basement. As they unbundle they’ll be looking for apartments but they’ll be competing with a lot of empty nest boomers too. Demographics is destiny.

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10yr Apartment Building Loan Rate Back On It’s Meds at 4.375%

10 year apartment building investment loan rates
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After showing signs of life in June and July the 10yr apartment building investment loan rate we track seems to be fully anesthetized once again and is resting comfortably at 4.375%. Meanwhile the ULI rate seemed to be steadily working its way lower, following the ten year Treasury down which got as low as 2.01%. That all ended with the Chinese stock market melt down and currency devaluation a couple weeks ago and drove the ULI rate up 27bp to 3.82%.

Chinese stock market has only fallen back to where it was in February
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Interestingly despite all the panic about the Continue reading 10yr Apartment Building Loan Rate Back On It’s Meds at 4.375%

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The Nick Hanauer Problem: Why the recovery is going so slowly.

Changes in Mean and Median Net Worth.
Changes in Mean and Median Net Worth.

Invictus over at the Big Picture Blog had a chart rich article last month called “Bill Gates walks out of a bar – Of Means & Medians” that explored some of the causes for the slow economic recovery in the US.

What really caught my attention was how skewed the distribution of wealth is with the mean being 6.5X the median. How do we keep the peasants from revolting in these conditions? Or more realistically because 90% of us are not in the top 10% why do we not revolt?

With the Mean Net Worth 6.5x larger than the Median, the distribution in very skewed.
With the Mean Net Worth 6.5x higher than the Median, the distribution in very skewed.

This means that the economy is suffering from the Nick Hanauer problem; the wealthy aren’t Continue reading The Nick Hanauer Problem: Why the recovery is going so slowly.

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Apartment Financing Hits An Air Pocket in Latest NMHC Survey

Apartment Building Investment Lending Conditions July 2015

The National Multifamily Housing Council’s NMHC Quarterly Survey is out now and three of the four categories held fairly steady but the availability of  debt financing dropped twenty five points from sixty to thirty five. A reading below fifty indicates worsening conditions and the report on the survey said that with Continue reading Apartment Financing Hits An Air Pocket in Latest NMHC Survey

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Treasury rates are up but…

10 year Treasury rates vs. apartment builiding investment loan rates thru July 2015
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For this month’s post on apartment building investment loan rates and the key 10yr Treasury (T10) we’re looking at the longer trend back to the beginning of 2013. The news has been full of talk about rising interest rates but looking at the chart above we can see that while the T10 is up off its recent low of 1.68% in the end of January it’s still more than 50 basis points below the highs it hit in September and December 2013 (2.98% and 3.04% respectively).

In turn the 10 year apartment loan we track has been treading water around the 4.3% mark for the last nine months and essentially it’s back to where it was in early 2013 before the Continue reading Treasury rates are up but…

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What’s your personal GDP- Gross Domestic Pleasure?

Most of the economic statistics that we rely on to understand how the economy is doing (and contribute to the apartment building investment cycle) were created in the 1930s and ’40s, smack dab in the middle of the Industrial Age. They haven’t changed much

What's your personal GDP- Gross Domestic Pleasure?
Click the image to see the thought provoking NYT Magazine article that inspired this post: “The Economy’s Missing Metrics”. Illustration by Andrew Rae

since then, you can find out a lot about woodworking-machine-setters but all web developers are thrown into a single category. Such as they are they were an attempt to measure something that seems quite radical especially coming from economists: Is the government making life better or worse for its citizens? Not how many pairs of shoes were manufactured, how long they sat in warehouses and the average price they sold for.

The intellectual leader for this radical thought was Simon Kuznets who as an immigrant had a special respect for the promises of democracy. He believed politicians should be Continue reading What’s your personal GDP- Gross Domestic Pleasure?

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Aided by falling spread, apartment loan rate fights its way back below 4.5%.

10 year apartment building investment loan rates June 2015
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The apartment building investment loan rate we track moved down from last week’s 4.532% to just under 4.5 at 4.489% aided by the spread to the 10yr Treasury (T10) compressing to 2.142 versus the week earlier 2.185. Meanwhile the T10 and the ULI rate seem determined to raise rates even if the Fed doesn’t act. And Greece is set to Continue reading Aided by falling spread, apartment loan rate fights its way back below 4.5%.

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Are Interest Rates Caught in a Catch 22?

Are interest rates caught in a Catch-22? What if the Fed is waiting to raise rates until the economy is growing stronger but the economy won’t grow stronger until rates go up?

10 year Treasury Rates June 2014 - May 2015

For three years everyone has ‘known’ that interest rates were going up but other than during the Taper Tantrum of June 2013 which affected loan rates more than Treasuries, the T10 only moved up to the 2.75% area which was just picking itself off the floor of 1.66 where it got down to in May that year.

The Fed would like to raise rates, if for no other reason than to prove they aren’t turning Japanese by leaving rates low for two and a half ‘Lost Decades’. They’d also like to have room to lower them again if the economy dips back into recession (Note Q1 GDP was just revised down to -.7% that’s Continue reading Are Interest Rates Caught in a Catch 22?

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