Apartment Investment Loan Rates Drift Lower But Spread Widens

Over the last month the apartment loan rate we track eased slightly from 5.17% to just under 5 at 4.959% as the 10 year Treasury continued to fall causing the spread to rise above its 6 month average for the first time since July of last year but remains tighter than a year ago:

Apartment Investment Loan Rate versus 10 year Treasury Feb 2014

Speaking of the spread between the T10 and the ten year apartment loan rate, now that Continue reading Apartment Investment Loan Rates Drift Lower But Spread Widens

Update on the 10yr Treasury rate which drives Multifamily, Commercial Real Estate and Home loan rates.

In the Analysis on Tapering QE3 post Tuesday I included a chart of the US 10 year Treasury rates and you could see them going vertical in the days since the Fed announcement and Bernanke’s press conference last week. We’re in the middle of negotiations on an apartment acquisition with a client and so what interest rates do over the next few days and weeks is extremely important to us. So here’s the updated chart:

10 year Treasury rate chart YTD 2013
Click for full size image. *Treasury Yield Curve Rates, commonly referred to as “Constant Maturity Treasury” rates, or CMTs. This method provides a yield for a 10 year maturity even if no outstanding security has exactly 10 years remaining to maturity. More at www.treasury.gov

We concentrate on the 10 year Treasury because that is the benchmark most lenders base their long term rates on. In order to lure investors away from Treasuries to buy mortgage bonds lenders have to Continue reading Update on the 10yr Treasury rate which drives Multifamily, Commercial Real Estate and Home loan rates.

Freddie Mac sees strong apartment rental growth next five years in valuation report.

A very interesting report on apartment building investment posted on the Freddie Mac website discussing Current Multifamily Values & Cap Rates In Historical Context explores where the market is today and where it is likely to be in five years under a number of different interest rate scenarios. Freddie doesn’t do loans smaller than $5 million (implying a minimum deal size of $6.6-7 million) and many of their borrowers are large institutional investors but the forecasting methods and valuation models they use are applicable to apartment building investing on any scale.

Apartment building investment values and cap rates

Some takeaways from the report:

Rental growth rates are expected to be Continue reading Freddie Mac sees strong apartment rental growth next five years in valuation report.

Financing still tight in secondary and tertiary apartment markets says NMHC.

The April 2012 National Multifamily Housing Council’s Quarterly Survey of Apartment Market Conditions was conducted April 16-23, with 91 CEOs and other senior executives of apartment-related firms nationwide responding.

Capital availability lacks uniformity. Only 17 percent of multifamily firms reported that capital is available for all property types in all markets. By contrast, 36 percent said it is constrained in secondary and tertiary markets and 34 percent said it is constrained for all properties other than top-tier ones – even in primary markets.

The Debt Financing Index declined to 65 from 74. As the only index that dropped below 50 in the past nine quarters (48 in Q4 2010), borrowing conditions continued to improve for the industry. Just four percent believed conditions worsened from last quarter, compared to 34 percent who reported improving conditions.

The Equity Financing Index grew slightly to 62 from 60. One third of respondents reported quarter-to-quarter equity financing as more available, compared to nine percent reporting less availability.

See the excellent exec sum on Joseph Bernard Investment Real Estate’s blog here: Market Conditions Improve For Apartment Industry

Life Companies up their Apartment Building Investment lending, competing with Fannie/Freddie on rates, quicker rate locks and easier terms

Life companies are increasing their lending on apartment building investments says MFE Magazine.

Apartment Building Investment Loans

Life insurance companies upped the ante last year, processing apartment building investment loans hand over fist. And this year, most have increased their appetite and are charging through the first quarter at full speed, giving the government-sponsored enterprises (GSEs) a run for their money.

Most life companies today have the ability to be competitive with, and sometimes price inside of, the GSEs.  This is particularly true for lower-leverage deals—and the most desirable assets.

But it’s not just attractive pricing—life companies also offer Continue reading Life Companies up their Apartment Building Investment lending, competing with Fannie/Freddie on rates, quicker rate locks and easier terms