July, 2013 | Ashworth Partners

10yr Treasury back in 2.6% range bringing apartment loan rates up. The spread also widened but remained below 2013 average.

Quick update: The 10 year Treasury (T10) climbed back up into the 2.60% range while the 10 year fixed apartment building loan we track moved up to 5.033%. The spread between them widened to 242bp but remains below the 2013 average of 265bp. This week we’ve added the darker green line to show the average spread between the T10 and the apartment rate on the chart. Note that it uses the Right Hand Scale along with the spread itself:

10 year Treasury rate vs 10 year fixed apartment building investment loan July 2013 — 10yr Treasury Rate via St. Louis Fed’s FRED data, contact us about the apartment loan rate and details: www.ashworthpartners.com

For details on the apartment loan we track see the notes in last week’s post here: Apartment Building Loan Rates Fall as Spreads Narrow.

How the St. Louis Fed calculates the 10 year Treasury rate displayed above: “Treasury Yield Curve Rates. These rates are Continue reading 10yr Treasury back in 2.6% range bringing apartment loan rates up. The spread also widened but remained below 2013 average.

Apartment Building Loan Rates Fall as Spreads Narrow

Back on June 24th I wrote a post Analysis on Tapering QE3 talking about how traders fears about the end of the Fed’s money printing spree made the interest rate on the 10 year Treasury jump. And as I mentioned in a follow up post Update on the 10yr Treasury rate we care about the 10yr Treasury (or T10) because it’s the benchmark most lenders base long term loan rates on. But there is one more component of apartment loan rates (and lending rates in general) that I want to draw your attention to. First an updated chart:

I’ve updated the chart with the latest rates and also added the rate for an apartment loan with a fixed rate for 10 years from one of our lenders (details on the loan terms below). The other thing I added was the spread, or difference, between the two rates (on the Right Hand Scale). So far in 2013 the spread has averaged 2.65% or 265 basis points (bp) but it’s not a fixed amount that the lender adds to the T10. You can see that back in the beginning of May when the Treasury rate got as low as 1.66% the spread widened to 280bp because the loan rate was left at 4.5%. Then the spread narrowed back towards the average even while interest rates went up from there.

Then the Fed meeting notes came out in the middle of June and the T10 shot up but we got a double dose because the spread jumped up too. The Treasury went from 2.19% on the 17th to 2.57% on the 24th, and the spread jumped from 262pb to 283. It makes sense that in the uncertainty of a sudden rise in rates that lenders would widen their spreads to create a little breathing room but since then things have gotten quite interesting… in a good way. The good news is that since then the spread has Continue reading Apartment Building Loan Rates Fall as Spreads Narrow

Update on Recession Probability: Rough Seas Ahead?

Back in March I posted a FRED chart that Bill McBride over at Calculated Risk shared tracking a set of data that pretty reliably coincides with recessions. Even better is that in almost fifty years of data there have been only two false positives which brings us to a very interesting point. First, here’s the chart as it appeared when I posted back in March:

FRED Recession Probabilities March 2013 — Looks like pretty smooth sailing since 2010

Next let’s look in more detail at those false positives:

FRED Recession Probabilities March Detail — FRED Recession Probabilities March 2013

This is what I like about this data series: Even if we set the bar as low as 5%, there have only been two instances Continue reading Update on Recession Probability: Rough Seas Ahead?

Job growth vs. revenue growth chart of top apartment building investment markets in the US- updated.

Back in February we posted an Axiometrics chart plotting the revenue growth vs. job growth in leading apartment investment markets in the US. They were out last week with an updated chart but not just in the way we might think since the numbers are Axiometrics’ 2013 forecasts for revenue and job growth updated through May this year. To me the real ‘update’ is that they reversed the axises on the chart and I think it makes more sense laid out this way:

Job Growth and Rent Growth for Apartment Building Investment — Click for full size image. Source: Axiometrics

Before I get sidetracked onto a long discussion on the importance of understanding just Continue reading Job growth vs. revenue growth chart of top apartment building investment markets in the US- updated.