How is the increasing interest rate negatively affecting the Multifamily Real Estate Market?
10-year treasury has definitely made a move over the last month, it's a 10 year treasury and hovering anywhere from three nine to four percent right now and you know how this impacts buyers right so the inflation's high interest rates so for antenna treasury are high.
So, for buyers it's hitting you Debt Service is increasing your interest rate caps are increasing and then this is the big thing to me is harder to refinance out of these Bridge lines right so when your Bridge loan was done you maybe were thinking we'll have a five percent rate maybe five and a half but nobody was really anticipating exiting at a six percent debt six percent interest rate, so that just makes it harder and harder to refinance into agency loans right now.
So, what we're seeing is the impact to sellers right now um you know there's there's not that
much inventory on the market you know at the beginning of the year, you might see it's probably in the single digits in terms of deals that are listed right now and even those deals that are listed.
There's not that many tours and not that many buyers and so what you're seeing is it's definitely the buyer's market right now and cap rates are expanding so um cap rates are going up and we're still trying to figure out where that equilibrium is. But, as buyers are making offers the 10-year treasury keeps going up, so it makes it harder and harder to underwrite, makes it more difficult as you put more and more Equity into these deals.
One of the effects of higher interest rates is that if it does lead us into a recession and there are job losses, then what is that going to do to demand for apartments? So, you look at the real page and one of the things they look at is absorption - so how many units are
constructed, and then how many are actually absorbed, and so this is net absorption... so this is really looking at, for the first time, seeing a negative absorption in the third quarter.
James Eng of Old Capital goes through:
1) Economic and Multifamily Market Update
2) Multifamily Financing Options- Bridge loans, Fannie Mae, Freddie Mac, Recourse Bridge Loans
3) Recently closed loans
Contact James Eng
214-300-5035
jeng@oldcapitallending.com
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