Falling Spread Prevents Apartment Investment Loan From Jumping

Falling Spread Saves Apartment Investment Loan Rate

First I want to take a moment to remember all those who lost or gave their lives as well as their families and friends that terrible day sixteen years ago. I have four friends who but for their own unique twists of fate would have been in the twin towers on 9/11 and their good fortune is a stark reminder of so many who weren’t that lucky. Also I keep in my thoughts all those who are suffering because of wild fires, hurricanes, floods and earthquakes around the world right now. – Giovanni

The 10 year apartment investment loan rate we track fell 10 basis points (bp) from last month even though the benchmark 10yr Treasury rate jumped 8bp today to 2.14%. The spread between the two shrank to 218bp, the Continue reading Falling Spread Prevents Apartment Investment Loan From Jumping

Is Builder Sentiment a Better Predictor of the Apartment Investment Cycle?

Builders Predict the Apartment Cycle

Are apartment builders better predictors of the Apartment Building Investment Cycle? Based on the latest cycle at least (a sample of one, admittedly) it appears that they are.

On the chart above the blue line represents the NAHB’s Multifamily Production Index (MPI) which began falling in the 3rd quarter of 2005 and fell for four straight Continue reading Is Builder Sentiment a Better Predictor of the Apartment Investment Cycle?

What do FHA mortgages, shopping malls, urban renewal, master planned communities, Architect Frank Gehry and LITCH housing have in common?

Columbia City’s original master plan model

(The Exec Sum for this post is at the end)

Recently I was watching the Harvard Joint Center on Housing’s State of the Nation’s Housing panel discussion which coincided with the release of their annual housing report. On the panel were Terri Ludwig, Enterprise Community Partners CEO; Mayor Catherine E. Pugh of Baltimore as well as Robert C. Kettler, Chairman & CEO, Kettler, a large East Coast developer of tax credit and market rate housing. I thought this particular panel couldn’t have been put together randomly.

The connection to the items in the headline as well as to the people on the panel was a single Continue reading What do FHA mortgages, shopping malls, urban renewal, master planned communities, Architect Frank Gehry and LITCH housing have in common?

Apartment Conditions Improve But Still Below Par- NMHC July Survey

All four of the indexes in National Multi-Housing Council’s July survey improved but remained below the 50 better/worse boundary bringing the average up to 46 from 39.

The biggest improvement was in the Continue reading Apartment Conditions Improve But Still Below Par- NMHC July Survey

Falling Spread Helps Apartment Loan Rate Weather Rise in 10yr Treasuries.

The 10yr apartment loan rate we track rose 12 basis points (bp) to 4.60% from 4.48%, where is was on our report last month. During the same period the 10yr Treasury (T10) rose from 2.21% last month to a high of 2.39% last week before backing off 2bp as of yesterday. What saved the apartment rate from rising 50% further alongside the T10 was that the spread was reduced from a high of 2.9% to 2.22%.

The ULI <60LTV loan we track did not Continue reading Falling Spread Helps Apartment Loan Rate Weather Rise in 10yr Treasuries.

How to know when your apartment market cycle is peaking…

Apartment Investment Cap Rate Vancouver BC

Quote: “[A] very active market that continues to give strong weighting to underlying land value and potential future use, even if this use is far off in the future.” – James Glen, VP, Colliers Vancouver, BC [Emphasis mine]

Any time you see future and potential in the same sentence referring to real estate, watch out…

Oh and another sign is when the average cap rate for a low-rise apartment deal is 3% while high-rises are at 2.5! Just for reference, a 2.5 cap is the equivalent of a 40x multiple (aka PE or Price Earnings Ratio) on a stock meaning that it would take 40 years of earnings (NOI in the case of real estate) to repay the purchase price and that is definitely “far off in the future“.

You can see all the Canadian Cap Rate reports from Colliers here: Canada Cap Rate Report Q1 2017

Happy summer everyone-

P.S. If you’d like a handy chart for converting Cap Rates to Earnings Multiples shoot me a message with Cap Rates to Earnings in the subject line.

Apartment Loan Rates Continue To Drift Lower- June 2017

The apartment investment loan rates we track have continued their downward trend. In March the 10yr loan (details below) hit 4.92%, the highest its been since February 2014, and has drifted lower since coming in at 4.48% this week. That and the Continue reading Apartment Loan Rates Continue To Drift Lower- June 2017

Are We Looking At An Extended CRE Cycle? What About Apartments?

Ed.: I’ve added the vertical lines indicating peaks in Rent Growth and Unemployment

The Bullets

  • Comparing this recovery to any other post-war is not meaningful
  • There are no statistical constraints on a real estate cycle
  • The apartment cycle will be driven by three types of demand that many underestimate

In his latest Ahead of the Curve piece, Richard Barkham, Ph.D., CBRE Global’s Chief Economist explores whether the commercial real estate cycle turns down in 2018 or  extends beyond for a year or two. His conclusion is a version of Harry Truman’s Continue reading Are We Looking At An Extended CRE Cycle? What About Apartments?

Apartment Loan Rate Update May 2017 – A Different Kind of Range

The apartment investment loan rate we track remains in the range of 4.51 – 4.92% where it’s been since the election six months ago, coming in at 4.67% this week. Now that range sure looks different than the one it was in Continue reading Apartment Loan Rate Update May 2017 – A Different Kind of Range