The good news is that our sales pace and inventory levels continue to stay fairly steady. Inventory levels dropped nearly 4% over the New Year and closings picked up to give us a market supply of 8 3/4 months, nearly twice as many as 1 year ago when we were sitting at 15 3/4 months.You do have to take into account that historically good or bad market housing inventory always drops over the holidays. People don't like to put their property on the market during those times when they are busy with everything else and if their house is ever going to look like a disaster, that would be the time. All of us here at Cactus Country know if we could get some loans available to qualified people, our closing numbers would be so much higher and our inventory that much lower which would definitely stimulate some movement in the market. We can have the lowest interest rates, which seems to be the case right now but if the bank isn't going to lend, it does absolutely nothing for us. If you are positioned right for your financing, there are some excellent deals out there.
The Realtor calls are on the increase and the potential listings call have really increased this past week.
Showing posts with label interest rates. Show all posts
Showing posts with label interest rates. Show all posts
Sunday, January 11, 2009
Sunday, January 4, 2009
Happy New Year and a Very Prosperous One
It will be interesting, I'm sure when we look back a year from now and see where we went and how many turns we took getting there.
Lets all hope that we get the banks to loosen up some money for credible, eligible people to get loans. We are at a 37 year low for interest rates. That's a great way to start off 2009. All we need is the banks to give up the money so we can take advantage of these rates. First time homeowners have a wonderful opportunity here and Realtors have to be searching out that client base that went on the back burner November 1 when the ability to use down payment assistance went away along with the strict lending guidelines that stayed constant. I bet those lists are coming out of files and being checked twice. Low interest, low prices and still be able to get seller assistance on closing costs just not down payment could produce some very positive results. As we all know a little movement at the lower level and it all moves.
Happy New Year
Lets all hope that we get the banks to loosen up some money for credible, eligible people to get loans. We are at a 37 year low for interest rates. That's a great way to start off 2009. All we need is the banks to give up the money so we can take advantage of these rates. First time homeowners have a wonderful opportunity here and Realtors have to be searching out that client base that went on the back burner November 1 when the ability to use down payment assistance went away along with the strict lending guidelines that stayed constant. I bet those lists are coming out of files and being checked twice. Low interest, low prices and still be able to get seller assistance on closing costs just not down payment could produce some very positive results. As we all know a little movement at the lower level and it all moves.
Happy New Year
Saturday, February 16, 2008
Kath's Rate News
I thought you might find this of interest and remember “It is a great time to buy!”
Mortgage Bonds have traded wildly up and down over the past six days. So if you like volatility, this market is for you. Mortgage Bonds are now trading lower after this morning's Durable Goods release, which was reported well above expectations. It is known that, the Durable Goods Report is a volatile one, but the 5.2% reading was far above expectations of 1.2% and could signal that business capital investment is picking up or paint the picture that the economy is not as bad as previously thought. This translates to even more guessing about the Fed's decision tomorrow. Will it be a cut of a quarter or a half percent?
The consumer is still feeling pretty confident as Consumer Confidence for January was reported at 87.5, which was stronger than expectations of 87.0. Adding further strength to the report is an upward revision to December's reading from a previously reported 88.6 to 90.6. This morning's stronger than expected report has to raise some eyebrows at the Fed, which starts their two-day meeting today.
The Fed’s interest rate decision and Policy Statement is set for release tomorrow afternoon at 2:15pm ET. At least two former voting Fed members see a half point cut to keep the markets from going back into the sharp decline we had seen just last week. And the futures contract, which is not so good at predicting longer term Fed moves, but very good at the near term move, is pricing in an 86% chance of a 50bp or half percent cut...we see this scenario playing out as well.
If the Fed does cut by 50bp - the long term picture may not be so good for Mortgage Bonds. The Fed has already cut 175bp since September 18th, bringing the Fed Funds Rate down to 3.5% from 5.25%. And don't forget the 50bp cut in just the Discount Rate back in August. Add in the President's Stimulus Package and another 50bp cut tomorrow and you have a whole lot of ammunition to juice the economy. Remember that it takes 6 to 9 months for the effects of a Fed Move to be realized. And we are barely 4 months past the initial Fed cut. If inflation flames arise, bond prices will suffer later, as the fixed rate of return they generate must yield a number to compensate for higher inflation.
And in watching many so called experts parade in front of the news cameras this morning, it was funny to hear some of the comments. An economist from S&P said that most mortgages are priced off the 10-year Note...scary. Another said the Fed's recent cut (exactly one week ago) has had no effect on housing. Again, this shows how little understanding these individuals have about the way our business works. Do they really think that people see the Fed cut, get in their car, buy a home, get a mortgage, and close within a week?
Note the Floating Bias today - this does not mean to take your eye off the ball as we are already seeing a decline in MBS prices. Watch the windows; I will alert you if things get nasty. This is a good time to get the message out to your clients, who may be waiting on rates to drop further. As always, loan applications never peak at the lowest point for rates...they do so when rates start moving up and clients get off the fence before the train leaves the station. Warn your clients of this common error. It is wise to have your clients in queue, especially those above $417k, but below $625K. This way they can pounce on the lower rates once the conforming limit is raised.
Kathleen ReinertHome Mortgage ConsultantWells Fargo Home MortgageMAC S4153-02020369 N 59th AveGlendale, AZ 85308623.445.2297 Tel602.620.3105 Cell866.254.1668 Fax866.207.6731 ext2297 Toll Freekathleen.reinert@wellsfargo.com http://www.kathleenreinert.com
Mortgage Bonds have traded wildly up and down over the past six days. So if you like volatility, this market is for you. Mortgage Bonds are now trading lower after this morning's Durable Goods release, which was reported well above expectations. It is known that, the Durable Goods Report is a volatile one, but the 5.2% reading was far above expectations of 1.2% and could signal that business capital investment is picking up or paint the picture that the economy is not as bad as previously thought. This translates to even more guessing about the Fed's decision tomorrow. Will it be a cut of a quarter or a half percent?
The consumer is still feeling pretty confident as Consumer Confidence for January was reported at 87.5, which was stronger than expectations of 87.0. Adding further strength to the report is an upward revision to December's reading from a previously reported 88.6 to 90.6. This morning's stronger than expected report has to raise some eyebrows at the Fed, which starts their two-day meeting today.
The Fed’s interest rate decision and Policy Statement is set for release tomorrow afternoon at 2:15pm ET. At least two former voting Fed members see a half point cut to keep the markets from going back into the sharp decline we had seen just last week. And the futures contract, which is not so good at predicting longer term Fed moves, but very good at the near term move, is pricing in an 86% chance of a 50bp or half percent cut...we see this scenario playing out as well.
If the Fed does cut by 50bp - the long term picture may not be so good for Mortgage Bonds. The Fed has already cut 175bp since September 18th, bringing the Fed Funds Rate down to 3.5% from 5.25%. And don't forget the 50bp cut in just the Discount Rate back in August. Add in the President's Stimulus Package and another 50bp cut tomorrow and you have a whole lot of ammunition to juice the economy. Remember that it takes 6 to 9 months for the effects of a Fed Move to be realized. And we are barely 4 months past the initial Fed cut. If inflation flames arise, bond prices will suffer later, as the fixed rate of return they generate must yield a number to compensate for higher inflation.
And in watching many so called experts parade in front of the news cameras this morning, it was funny to hear some of the comments. An economist from S&P said that most mortgages are priced off the 10-year Note...scary. Another said the Fed's recent cut (exactly one week ago) has had no effect on housing. Again, this shows how little understanding these individuals have about the way our business works. Do they really think that people see the Fed cut, get in their car, buy a home, get a mortgage, and close within a week?
Note the Floating Bias today - this does not mean to take your eye off the ball as we are already seeing a decline in MBS prices. Watch the windows; I will alert you if things get nasty. This is a good time to get the message out to your clients, who may be waiting on rates to drop further. As always, loan applications never peak at the lowest point for rates...they do so when rates start moving up and clients get off the fence before the train leaves the station. Warn your clients of this common error. It is wise to have your clients in queue, especially those above $417k, but below $625K. This way they can pounce on the lower rates once the conforming limit is raised.
Kathleen ReinertHome Mortgage ConsultantWells Fargo Home MortgageMAC S4153-02020369 N 59th AveGlendale, AZ 85308623.445.2297 Tel602.620.3105 Cell866.254.1668 Fax866.207.6731 ext2297 Toll Freekathleen.reinert@wellsfargo.com http://www.kathleenreinert.com
Tuesday, September 18, 2007
Commercial Financing
September 11, 2007
COMMERCIAL FINANCING UPDATE
Reduced Interest Rates from Portfolio Lenders
A combination of factors, including the recent bond rally and the emergence of portfolio lenders, has resulted in 5-year fixed rates of 6% for average quality multi-family properties. Commercial property financing is available at slightly higher interest rates (6.25% to 6.5%). Portfolio lenders have strengthened their strategic position in the current market, while many conduit/CMBS lenders have elected to cease issuing loan quotes or Letters of Interest. Those conduit/CMBS lenders that are issuing loan quotes have increased the spreads to compensate for challenging capital market conditions. A portfolio lender funds loans with its own capital and has the ability to hold loans on its balance sheet.
Many commercial and multi-family property owners are choosing to pay-off their existing mortgages by refinancing with portfolio lenders to:
1- Lock-in historically low interest rates for 5-7 years
2- Obtain flexible prepayment penalty – i.e. declining 5-4-3-2-1 for 5-year fixed rate
3- Improve the property cash-flow through a combination of reduced interest rates and gradually-increasing rental rates
Understanding Appraised Value in Relation to Sales Price and Loan Amount
Commercial/Multi-Family real estate purchase contracts have customarily excluded any contingency provisions related to the appraised property value as it relates to the sales price. This practice differs from A.A.R, residential purchase contract language, which includes an appraised value contingency provision. According to the residential purchase contract, buyers have the right to cancel the contract in the event that the appraised value is less than the purchase contract. Commercial/Multi-Family real estate buyers waive all contingencies prior to the end of the financing contingency period, based on their receipt of a financing commitment from a reliable lender. The property appraisal is intended to meet the underwriting requirements of the lender, and is not intended for the use of the buyer or seller.
In the event that buyers and sellers of commercial/multi-family real estate are considering the use of the property appraisal in the negotiation of the sales price, there are several unique considerations that should be addressed:
1- Appraisal Assignment Requirements – The appraised value is based on the appraiser’s analysis according to the lender’s assignment requirements. For example, the assignment requirements may specify the use of market vs. actual rents. Since buyers and sellers are not a party to the appraisal, they have no control over the specific scope of work.
2- Copy of Appraisal – The appraisal is the property of the lender. Some lenders may not authorize the release of the appraisal to the buyer or seller.
3- Appraised Value and Net Operating Income (NOI) – The lender determines the loan amount based on the property’s NOI (i.e. minimum 1.15 debt coverage ratio) and appraised value (i.e. loan not to exceed 75% LTV).
It is important to note that the NOI is one of three factors used by the appraiser to determine the appraised value. Appraisers apply an appropriate Capitalization Rate to determine the value based on the income approach. For example $100,000 NOI divided by .055 cap rate equals $1,800,000 value. The other two valuation methods are the cost approach and sales comparison approach. The appraiser uses his professional judgment to use one or a combination of the three valuation approaches to arrive at the final Reconciled Appraised Value.
Receiving an appraised value equal to the sales price does not assure the buyer of a 70-75% loan. For example, multi-family appraisals frequently agree with the sales price when appraisers use current market cap rates. NOI has not kept pace with the increases in the price/unit paid for apartments over the past several years. This has resulted in historically low cap rates.
Since the primary factor in determining the loan amount is the Debt Coverage Ratio (i.e. NOI divided by 1.15), the maximum LTV for many properties is 60-65% of the purchase price. Based on $100,000 NOI, the maximum loan amount for a 6% interest rate is $1,200,000 (67% of $1,800,000 – see above).
In most cases, the ability of the buyer to obtain a minimum loan amount is more critical than the confirmation of the property’s appraised value. Many buyers knowingly pay more than “as-is” appraised value based on their assessment of the potential for increased property value. Increased value may occur from future rental increases, reduced operating expenses, property appreciation, or property repositioning. According to Vince Davis, of Davis Valuation Group, “Appraisers are required to comply with USPAP standards when preparing appraisals for clients. When preparing an “as-is” appraisal report, these standards include the use of actual rental rates and operating expenses. This valuation method does not account for other factors that may increase the property value after close of escrow.”
Conclusion
An appraiser’s conclusion of property value may not be a reliable basis for a commercial/multi-family contract negotiation. Experienced real estate brokers and their clients are in the best position to establish a property’s sales price based on a consideration of:
Current market conditions
Financing Terms – interest rate, portfolio vs. conduit, loan-to-value ratio, etc.
Experience and financial ability of the buyer to complete the transaction successfully
Resources
Vince Davis, Davis Valuation Group – Contributed technical information and editorial review for this article
430 E Southern Ave, Tempe, AZ 85282 – 480 968-7449 -
www.davisvaluation.com
Commercial Real Estate Institute – Continuing Education and Professional Designations for Commercial Real Estate Agents and Brokers
602 285-1433
www.commercial-real-estate-institute.com
Robert T. Gibney & Associates
4300 N. Miller Road, Suite 212, Scottsdale, Arizona 85251
480 429-3642
www.AZCommercial.Biz
COMMERCIAL FINANCING UPDATE
Reduced Interest Rates from Portfolio Lenders
A combination of factors, including the recent bond rally and the emergence of portfolio lenders, has resulted in 5-year fixed rates of 6% for average quality multi-family properties. Commercial property financing is available at slightly higher interest rates (6.25% to 6.5%). Portfolio lenders have strengthened their strategic position in the current market, while many conduit/CMBS lenders have elected to cease issuing loan quotes or Letters of Interest. Those conduit/CMBS lenders that are issuing loan quotes have increased the spreads to compensate for challenging capital market conditions. A portfolio lender funds loans with its own capital and has the ability to hold loans on its balance sheet.
Many commercial and multi-family property owners are choosing to pay-off their existing mortgages by refinancing with portfolio lenders to:
1- Lock-in historically low interest rates for 5-7 years
2- Obtain flexible prepayment penalty – i.e. declining 5-4-3-2-1 for 5-year fixed rate
3- Improve the property cash-flow through a combination of reduced interest rates and gradually-increasing rental rates
Understanding Appraised Value in Relation to Sales Price and Loan Amount
Commercial/Multi-Family real estate purchase contracts have customarily excluded any contingency provisions related to the appraised property value as it relates to the sales price. This practice differs from A.A.R, residential purchase contract language, which includes an appraised value contingency provision. According to the residential purchase contract, buyers have the right to cancel the contract in the event that the appraised value is less than the purchase contract. Commercial/Multi-Family real estate buyers waive all contingencies prior to the end of the financing contingency period, based on their receipt of a financing commitment from a reliable lender. The property appraisal is intended to meet the underwriting requirements of the lender, and is not intended for the use of the buyer or seller.
In the event that buyers and sellers of commercial/multi-family real estate are considering the use of the property appraisal in the negotiation of the sales price, there are several unique considerations that should be addressed:
1- Appraisal Assignment Requirements – The appraised value is based on the appraiser’s analysis according to the lender’s assignment requirements. For example, the assignment requirements may specify the use of market vs. actual rents. Since buyers and sellers are not a party to the appraisal, they have no control over the specific scope of work.
2- Copy of Appraisal – The appraisal is the property of the lender. Some lenders may not authorize the release of the appraisal to the buyer or seller.
3- Appraised Value and Net Operating Income (NOI) – The lender determines the loan amount based on the property’s NOI (i.e. minimum 1.15 debt coverage ratio) and appraised value (i.e. loan not to exceed 75% LTV).
It is important to note that the NOI is one of three factors used by the appraiser to determine the appraised value. Appraisers apply an appropriate Capitalization Rate to determine the value based on the income approach. For example $100,000 NOI divided by .055 cap rate equals $1,800,000 value. The other two valuation methods are the cost approach and sales comparison approach. The appraiser uses his professional judgment to use one or a combination of the three valuation approaches to arrive at the final Reconciled Appraised Value.
Receiving an appraised value equal to the sales price does not assure the buyer of a 70-75% loan. For example, multi-family appraisals frequently agree with the sales price when appraisers use current market cap rates. NOI has not kept pace with the increases in the price/unit paid for apartments over the past several years. This has resulted in historically low cap rates.
Since the primary factor in determining the loan amount is the Debt Coverage Ratio (i.e. NOI divided by 1.15), the maximum LTV for many properties is 60-65% of the purchase price. Based on $100,000 NOI, the maximum loan amount for a 6% interest rate is $1,200,000 (67% of $1,800,000 – see above).
In most cases, the ability of the buyer to obtain a minimum loan amount is more critical than the confirmation of the property’s appraised value. Many buyers knowingly pay more than “as-is” appraised value based on their assessment of the potential for increased property value. Increased value may occur from future rental increases, reduced operating expenses, property appreciation, or property repositioning. According to Vince Davis, of Davis Valuation Group, “Appraisers are required to comply with USPAP standards when preparing appraisals for clients. When preparing an “as-is” appraisal report, these standards include the use of actual rental rates and operating expenses. This valuation method does not account for other factors that may increase the property value after close of escrow.”
Conclusion
An appraiser’s conclusion of property value may not be a reliable basis for a commercial/multi-family contract negotiation. Experienced real estate brokers and their clients are in the best position to establish a property’s sales price based on a consideration of:
Current market conditions
Financing Terms – interest rate, portfolio vs. conduit, loan-to-value ratio, etc.
Experience and financial ability of the buyer to complete the transaction successfully
Resources
Vince Davis, Davis Valuation Group – Contributed technical information and editorial review for this article
430 E Southern Ave, Tempe, AZ 85282 – 480 968-7449 -
www.davisvaluation.com
Commercial Real Estate Institute – Continuing Education and Professional Designations for Commercial Real Estate Agents and Brokers
602 285-1433
www.commercial-real-estate-institute.com
Robert T. Gibney & Associates
4300 N. Miller Road, Suite 212, Scottsdale, Arizona 85251
480 429-3642
www.AZCommercial.Biz
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