Good News on Latest 10yr Treasury, Apartment Building Loan Rates and Spread Chart

In more good news for apartment building investors, both the 10 year Treasury and apartment loan rates have moderated since the Fed’s “non-taper” announcement in mid-September. The spread between the T10 and the 10 year apartment loan rate we track has come in as well. Since 9/16 the Treasury has drifted down from 2.88% to yesterday’s quote of 2.53% while the loan rate has moved from 5.282 down to 4.921, bringing the spread in to 2.381 from 2.402. The average spread for 2013 has also narrowed to 2.573%:

 

10yr Treasury and Apartment Building Loan rates as of October 29 2013. More at www.ashworthpartners.com

Notes about the apartment Continue reading Good News on Latest 10yr Treasury, Apartment Building Loan Rates and Spread Chart

Apartment investors and residents big winners in office building repurposing. – chart

In many top US markets the supply of office space has not just been stagnant, it’s actually been shrinking and apartment building investors have been the beneficiaries.

In a CoStar piece out today entitled Didn’t That Used to Be an Office Building? they list a couple big advantages of converting office space to apartments: Office working residents are close to work, and there’s great access to public transportation. How many people who spend hours a day sitting on the freeway would like the option to park the car all week?

If you combine the residential and mixed use portions of the chart below, 56% of the office conversions/demolitions are going to apartments:

Apartment Residents love living close to work and transportation options. More at www.ashworthpartners.com

An interesting fact Continue reading Apartment investors and residents big winners in office building repurposing. – chart

Skate to where the apartment building investment puck is going: Top US markets for future population and job growth.

A lot of the usual suspects when it comes to multifamily markets have moved pretty far into their cycles and if your home area is like ours ti’s getting pretty fully priced. With our value investor mindset that means we’re looking for the next markets to do well over the coming 10-20 years. As apartment building investors we say:

Show Me The Apartment Building Investment Markets

Fortunately two different sources provided data and maps to answer Jerry’s demand. The first is from the NAHB (the National Association of Home Builders) in an Eye On Housing piece called Uneven Aging. The report actually has two maps, the first showing the 2000 to 2010 growth in the Continue reading Skate to where the apartment building investment puck is going: Top US markets for future population and job growth.

Multifamily Loan Rates Moderate Then Dip, Good For Apartment Building Investors.

10 year apartment building loan rates had been in a range the last few weeks until Ben Bernanke ‘failed to taper’ last Wednesday causing the bellwether 10 Year Treasury to fall about a dozen basis points to today’s quote of 2.72%. This is good news for apartment building investors, home buyers and builders, stock market speculators, just about everyone except savers, retirees and the people running retirement plans. The upside is that loan rates may head lower but the downside is the economy and particularly employment haven’t improved enough to ease off the money printing pedal.

Here’s the latest chart showing the T10, the 10 year fixed apartment rate we track and the spread between the two:

10 year fixed apartment building investment loan rate lower

This week’s quote for a 10 year fixed rate, 30 year amortization apartment loan is 5.131%. (See below for more detail on this loan). The other thing noticeable on the chart is that the spread between the rates has been below the yearly average consistently since the beginning of July. In fact the average spread has fallen to 2.602 from 2.661 over that period. Partly because 4.5% was about as low apartment rates were going to go no matter how far down Treasuries went but also I think that lenders are getting more aggressive, especially in the multifamily sector.

Continue reading Multifamily Loan Rates Moderate Then Dip, Good For Apartment Building Investors.

Apartment Building Investors beware: Important changes coming to Oregon landlord-tenant laws.

Cliff Hockley over at Bluestone & Hockley has the details on upcoming changes that apartment building investors should be aware of regarding their Oregon properties. A few bullet points, changes affect:

  • Screening of Section 8 and Section 42 tenants.
  • The establishment of a fund to offset damages caused by Section 8 tenancies.
  • Renter’s insurance can be required but…
  • Limits on tenant screening for evictions and arrest records.
  • Timing of notice periods.
  • Temporary occupancy.
  • Abandonment.
  • Plus: a good definition of ‘Person Crimes.’

Portland Oregon Apartments

See Cliff’s whole report here: A Review of the Legislative Changes to the Oregon Landlord Tenant Act and to Section 8 Tenancies

Continue reading Apartment Building Investors beware: Important changes coming to Oregon landlord-tenant laws.

Apartment Building Loan Rates Rise as 10yr Treasury jumps 31bp in Ten Days

After two weeks of holding at 5.068% the apartment loan rate we track rose to 5.274%, pushed higher by the 10yr Treasury moving up 31 basis points in the last week and a half. The spread between the two remained below the 2013 average of 2.628, coming in at 2.394:

Aparment Building Loan Rates Rise August 20 2013

This means that the monthly payment on a $1,000,000 apartment building investment loan with 30 year amortization would rise from Continue reading Apartment Building Loan Rates Rise as 10yr Treasury jumps 31bp in Ten Days

How much to budget for apartment building Capital Expenses? Many smaller properties spend up to 2x more

Mike Scott of apartment research firm Dupre+Scott has some shocking news for apartment building investors. While most lenders require a minimum reserve of $250 per unit per year for capital expenses and many owners reserve up to 400, according to actual expense budgets Mike tracked for properties in the Seattle area actual capital expenses have been averaging $750 a year for the last dozen years and the trend is definitely up:

Apartment Building Capital Expense Budgets vs Actual

These are actual CapEx expenses from actual properties and while they definitely vary from market to market, the cognitive error is probably about the same everywhere. Some investors may say well we only buy newer properties so that we don’t have CapEx to worry about. Unfortunately their research shows that even Continue reading How much to budget for apartment building Capital Expenses? Many smaller properties spend up to 2x more

10yr fixed apartment loan rate remains below 5.1% as 10yr Treasury ranges in 2.6-2.7% area

The rate on the 10yr fixed (30yr amortization) apartment building loan we track stayed in the 5.0-5.1% range for the second week while the spread to the 10yr Treasury remained in the 240 area, still lower than the 2013 average of 264:

Apartment building investment loan vs 10 year Trasury rate

The narrower spread makes sense in light of the July Senior Loan Officer Opinion Survey on Bank Lending that reported loosening lending standards for commercial real estate loans (including apartments) even as loan demand picked up: Continue reading 10yr fixed apartment loan rate remains below 5.1% as 10yr Treasury ranges in 2.6-2.7% area

More important than unemployment for apartment building investors?

We all know that jobs are a critical driver of the apartment building investment cycle and so we dutifully follow along with the talking heads when the unemployment number is estimated, released and then its potent debated.  But Mike Scott over at Dupre+Scott points out in a piece posted Friday that apartment building investors should be following employment, not unemployment. Specifically he recommends measuring how many jobs it takes to create demand for one apartment unit. Currently in King County (where Seattle is the county seat and where Dupre+Scott is located) it takes about 8 jobs to do that:

jobs required to fill one multifamily unit
Source: http://www.duprescott.com Note that we compressed Mike’s four charts into one for brevity.

The formula is simple: Net new jobs / apartment units absorbed. And if you’re an multifamily investor in the tri-county area (King, Pierce and Snohomish in WA State) that Dupre+Scott provides apartment investment research for, they’d be happy to supply you this information http://www.duprescott.com.

Looking at the chart we can see that while currently it takes about eight jobs to fill one unit it wasn’t always so and in fact the twenty year average is closer to nine. Mike explains Continue reading More important than unemployment for apartment building investors?

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.