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
The apartment building investment loan rate we track continued to trend downward as both the 10yr Treasury (T10) and the spread between the two came in during April. Today’s new rate on the loan is 4.733%, a 212 basis point spread over the T10 which was in the 2.61% area today. The six month moving average spread continues to fall suggesting that lenders are more confident and/or aggressive but the spread itself is above the March 17 low of 209bp.
This month we add a new rate which the ULI (Urban Land Institute) reports on from the Trepp survey. According to the ULI the Trepp rate is what large institutional borrowers could expect to pay on a 10 year fixed rate, less than 60% LTV loan for a “crème de la crème” core apartment property located in a gateway market. We track this rate as a barometer of what the largest lenders are offering their best customers on the most secure loans for any advanced warning about future rate and spread changes. See the ULI<60LTV Rate on the chart below (in gold). Note that the spread we chart is between 10yr loan we track (in orange) and the T10 (in blue):
Speaking of the spread between the T10 and the ten year apartment loan rate, now that Continue reading Apartment Building Investment Loan Rate Trends Lower as 10yr Treasury and Spread Fall.
For value investors, Demand, Supply and the Cost of Acquisition are the three factors affecting the apartment building investment decision and all are saying the time to buy is now. There is a tidal wave of new renters coming into the market and there has been little apartment construction to meet this growing demand. Outside of the gateway cities the prices of existing apartment buildings remain below the cost of building new. Fixed rate financing is available for apartment buildings at rates lower than we will see again for years if not decades.
“The multifamily sector is probably the only commercial real estate sector that has very positive fundamentals behind it,” said Jeffrey Baker, managing director at Savills LLC, a real estate investment bank that raises capital for multifamily owners and developers. “You’ve got a demographic that is producing more households that want to rent an apartment. You’ve got virtually no new supply that’s been added over the last several years.”1 Continue reading The Apartment Building Investment Triple Opportunity Is Right Now