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.
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%.
Interestingly despite all the panic about the Continue reading 10yr Apartment Building Loan Rate Back On It’s Meds at 4.375%
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 (aka the ‘average’) being 6.5X the median* (50% above, 50% below). 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?
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.
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
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…
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
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?
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%.
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?
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?
The 10 year apartment building investment loan rate we track moved up to 4.454% from 4.375% yesterday after flatlining at the old rate since the middle of January:
Even so it is still below what we used to think of as the 4.5% floor for this rate. Meanwhile the ULI rate has been tracking the 10yr Treasury, rising from 3.37% April 20th to 3.76% yesterday, a climb of almost 40 basis points.
Is this the beginning of the long anticipated (The 3rd or 4th year in a row that everyone’s known rates were going to rise) rate hikes? It makes sense that the Fed would like them to get up off the floor if for no other reason that they would have room to lower them again when they needed to. But is now the time to do that when China, Europe and the rest of the world are slowing down?
While the US economy has been Continue reading 10yr #Multifamily Investment Loan Rate Comes Back to Life, Rises 7.9 Basis Points
Property Management Insider had a piece out last week How Revenue Management Systems Make Leasing and Renewals Easier that talked about how RMS took all the emotion out of raising rents on renewing residents.
…a community manager may occasionally resist a rate increase for a long-time resident or one who has become valued over the years. Business is business, however.
“When they start to say, ‘Oh, Mrs. Johnson has been here six years,’ we try to get them away from the emotional aspect of pricing,” he said. “We say if we really wanted to lift our rents and maximize our revenue, we have to make some tough decisions, and some people who can’t afford it may have to move out.” [Emphasis Mine]
As owners, operators and property managers who doesn’t love getting top dollar rents?
The math behind RMS (if done correctly) can definitely drive rents higher if it’s backed up by enough data to draw statistically valid references. At its Continue reading Will Apartment Revenue Management Systems Drive Residents To Homeownership?