Multifamily Monday: Did You Miss the Boat on Interest Rates?

The Treasuries hit a 15-month low in August and then shot up. (Basketballs and kangaroos aren't the only things that bounce.) Are the heady days over? We're excited to have a panel of experts tackle that very question at this week's Bisnow Houston Multifamily Summit. We also asked NorthMarq VP Warren Hitchcock what he's seeing.

Warren (here with managing director Kerry French, who'll be speaking on our panel) says the 10-Year T-Bill troughed at 2.34% last month and has since risen to around 2.60%. He expects rates to continue to fluctuate and eventually rise based on the news from the Fed and economic recovery. Analysts believe the US Central Bank may hint at an earlier-than-expected hike in interest rates at the Fed’s Sept. 16 policy meeting in response to US jobs growth.

Warren says multifamily borrowers can choose really high leverage—a good Class-A Fannie Mae loan will be around 4.15% at 80% LTV—or a really low rate—lower-leverage/lower risk can lock in 3.90% interest rate and both agencies will be extremely competitive. He just closed a seven-year loan in Denver (pictured) at 80% LTV at an all-in rate of 4.3% for an older property. On the other side of the spectrum, he handled a 10-year structured adjustable rate mortgage in Los Angeles that's floating at 2.05%. It can be converted to a seven or 10-year fixed-rate loan on any rate change date after the second loan year. (The bonus: A rate cap doesn't have to be purchased until LIBOR goes above 2%.)

Warren tells us life companies are also aggressively seeking ways to win multifamily business—they’re locking in rates early and committing loans at final construction and certificate of occupancy, then funding at 50% occupancy with all-in rates in the high 3% range. Construction Permanent Programs have been active for longer-term holders, although rates are higher. Hear even more multifamily trends at our event: Sign up now!