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7% is the New Mortgage Rate Benchmark for Income Properties, RECI Reports
(CHICAGO, IL) - The Real Estate Capital Institute's Capital Scoreboard noted today commercial real estate capital markets are tightly strapped into the Wall Street roller coaster with rates jumping up and available funds tumbling down.
During the past week, mortgage pricing has been rapidly climbing, based on spreads over comparable-term treasuries.
Current conditions are expected to prevail until the end of the year, as many lenders have already reached their funding goals and objectives.
Key market highlights are as follows:
RECI Research Director Nat Zvislo notes some exceptions will apply to the current pricing. For example, prime multifamily and commercial properties with limited leverage of 50% or less could see pricing occasionally reduced by as much as one half of a percent.
Zvislo says that as a comparison, "today's commercial mortgage terms and conditions reflect pricing not seen since the beginning of the decade. However, leverage levels and funding availability are substantially less favorable than that time, as owners must post at least 10 to 15% more equity."
The Real Estate Capital Institute® is a volunteer-based research organization tracking debt and equity rate data. The Institute posts daily and historical rates, including treasuries and short-term rates. The Real Estate Capital RateLine 7RE-CAPITAL (773-227-4825) provides updates as necessary each business day.
Historical 5-year and 10-Year Mortgage Spread Range as Compared to the 10-Year US Treasury Note shown in chart below:
(The chart plots rates from 1983 through 2008. The blue area indicates the high and low range of mortgages (5-year and 10-year pricing combined) in relationship to the 10-year Treasury Note shown in red. The graph assumes lowest rates available at full leverage (e.g. 75% loan), rounded to the nearest quarter percent at the beginning of each calendar year.)
During the past week, mortgage pricing has been rapidly climbing, based on spreads over comparable-term treasuries.Current conditions are expected to prevail until the end of the year, as many lenders have already reached their funding goals and objectives.
Key market highlights are as follows:
- About 80% +/- of the traditional funding sources (life insurance companies, pension funds and banks) remain sidelined, waiting for more capital market stability.
- Five-year permanent loans are frequently breaking the 7%-mortgage-rate barrier, translating to spreads of about 400 basis points
- 10-year loans, the most common term, are priced 7.5% or more.
- Lenders will only seek conventional property types (apartment, industrial, office and retail); projects with "stories" shunned.
- Funds are still selectively available for refinancing, with a loan restriction of 65% +/- LTV.
RECI Research Director Nat Zvislo notes some exceptions will apply to the current pricing. For example, prime multifamily and commercial properties with limited leverage of 50% or less could see pricing occasionally reduced by as much as one half of a percent.
Zvislo says that as a comparison, "today's commercial mortgage terms and conditions reflect pricing not seen since the beginning of the decade. However, leverage levels and funding availability are substantially less favorable than that time, as owners must post at least 10 to 15% more equity."
The Real Estate Capital Institute® is a volunteer-based research organization tracking debt and equity rate data. The Institute posts daily and historical rates, including treasuries and short-term rates. The Real Estate Capital RateLine 7RE-CAPITAL (773-227-4825) provides updates as necessary each business day.
Historical 5-year and 10-Year Mortgage Spread Range as Compared to the 10-Year US Treasury Note shown in chart below:
(The chart plots rates from 1983 through 2008. The blue area indicates the high and low range of mortgages (5-year and 10-year pricing combined) in relationship to the 10-year Treasury Note shown in red. The graph assumes lowest rates available at full leverage (e.g. 75% loan), rounded to the nearest quarter percent at the beginning of each calendar year.)Copyright 2010 - 2012 WORLD PROPERTY CHANNEL NETWORKS, INC. All Rights Reserved.
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