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Multifamily Rates - going up or down?

Multifamily Rates - going up or down?

 

Over the last month the 10 year treasury rates has moved up by over 30 Bps.  At the same time spreads on Freddie and Fannie multifamily loans have dropped (more for Freddie than Fannie) easing some of that upward interest rate pressure on multifamily loans.   Where they are going from here is any ones guess but many people believe this upward pressure will continue. 

In the long run we must all agree that rates will go up.  Treasury rates are at very low levels from a historical perspective.  They have maintained this low level because of the recent credit crisis, a flight to own safe treasury securities and government intervention to keep rates low.   At some point this must end.   I maintain that rates will not increase for, at least, a few months, but I have been wrong many times in the past.

I recently read an interesting article; the history says the 10-year yields set for summer slide.    This article argues that the 10 year treasury will drop over the summer months.  OK the reasoning is a bit of "it happened before so it will happen again".  We know this is faulty logic, but that does not mean it's not true.   If that does happens we will see multifamily rates from Freddie, Fannie and HUD drop.   Most other lenders today are banks and they don't allow their rates to follow the treasury curve so these rates may not move    Also, Freddie and Fannie will probably not give you the whole treasury drop, if it occurs, but will give you some of it.

What does that mean?  Well, in today's market early rate locks are very difficult because everyone is concerned about value.   Therefore you need to be well on your way in processing, have your reports done, before you can lock rate.   So start the process now.   If you think you will be refinancing sometime in the next 6 months start the process now.  Get your appraisals done and sign up with a lender.  It's easier to slow the process down and delay the rate lock and closing then it is to speed it up.  You have no control over the treasury markets so learn from the Boy Scouts and "be prepared".

Today fixed rates on larger apartment properties are as low as 4.85% and floating rates start under 4%.  For smaller properties rates are in the mid 5% to mid 6% range.  These are great rates, don't miss them.  If you want more information on multifamily lending programs or rates shoot me an e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it..

 
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Part of the problem is the sheer number of short sales whereby banks have left owners in their homes for up to 2 years, before starting foreclosure. That has caused rents to stagnate in multifamily in the short term, and due to the decrease in available financing to build new projects, there will be a huge shortfall of "renter" housing as the "tsunami of foreclosures starts around the end of May. Your thoughts?

  Joanne Davis

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