Despite the ‘interesting times’ we’ve experienced since January 20, people still need a place to live, apartments still exist to serve that need and investors can still get a loan to buy one. To borrow JP Morgan’s phrase (the banker not the bank) however, the apartment investment loan we track has continued to Continue reading Apartment Investment Loans Survive Trump Inauguration
The average of the NMHC’s Apartment Conditions fell to 24 from 35 with all series but Equity Financing (holding at 33) falling from last quarter. Both Market Tightness and Sales Volume came in at 25 (down from 28 and 35 respectively) while the more volatile Debt Financing fell to 14 from 38 last fall.
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.
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
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%.