Facts & Figures
Fact 1:
Foreign acquisitions of US real estate increased from $1.5 billion in the first quarter to $2.5 billion in the second quarter. Through the end of July, foreign investors have acquired $4.3 billion of US commercial properties, representing just under 10% of all investment activity year-to-date. Acquisitions through the end of June, up 210% year-over-year, already exceed last year's grand total of $3.9 billion by nearly 12%.
Top Source Countries of Foreign Investment Is US Real Estate: Canada, Israel, South Korea, Switzerland, Netherlands, United Kingdom, Mexico, Germany, Malaysia, Australia. 2010 YTD through July 31, 2010
Source: Real Capital Analytics Inc.
Fact 2:
Overall Cap Rate Analysis - The average overall cap rate decreased in 26 Survey markets during the third quarter of 2011. Investors expect overall cap rates to either hold steady or decline in most markets over the next six months.
Moody’s reported that its Commercial Property Price Index (CPPI) was up 5% in July and that most of the increase was due to middle market asset pricing: As in June, the broad middle market (non-major assets and non-distressed assets) drove the bulk of the overall increase of 5.0% in the July CPPI. Middle market transactions have accounted for approximately 60% of volume in recent months. Distressed asset sales accounted for 27.6 percent of the overall sales volume, with the distressed index inching up 2.6 percent. While the “middle-market” segment is reportedly the contributor to the price increase, I am not sure how long that trend will last, as m-o-m transaction volume has fallen off a cliff.
Source: CRE Console Blog
Fact 3:
California August Home Sales. An estimated 37,734 new and resale houses and condos were sold statewide last month. That was up 8.8 percent from 34,695 in July, and up 10.2 percent from 34,239 for August 2010. An increase from July to August is normal for the season. California sales for the month of August have varied from a low of 29,764 in 1992 to a high of 73,285 in 2005, while the average is 48,344.
DataQuick's statistics go back to 1988.
Source: DataQuick; DQNews.com
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When you have it so good for so long, you forget just how good it is. Take the 30 year fixed rate mortgage for example. The thirty-year “term” is one of the most popular loans in history. The 30 year fixed rate mortgage was introduced during the New Deal of President Franklin Delano Roosevelt's administration through the creation of the FHA, or Federal Housing Administration. Prior to the new deal, mortgages were primarily of the "balloon" variety, similar in concept to an auto lease. You could make payments each month for 20 years and still owe the bank a large lump sum at the end of the loan. Roosevelt's administration devised a new concept in banking, a loan which had a fixed period of time, called a term, during which a fixed amount of principal and a fixed or variable amount of interest would be paid back - in full. This new "fully amortizing" loan consisting of principal and interest was a major innovation in banking. Where else in the world does a thirty-year term mortgage exist? Europe, Australia, Mexico, Canada, South America, Russia, Asia, United Emirates or Israel - Nowhere; Only in America! However, we took this for granted and now it is in danger of extinction. Currently 95% of home loans are controlled by the government using Fannie Mae, Freddie Mac, and FHA, but U.S. Congress is reviewing 3 options to overhaul home financing in this country. If the government steps back from insuring the mortgage market, the thirty-year mortgage product will vanish.
The thirty-year “interest rate” has fallen to historic lows.
The interest rates on 30-year mortgages are highly correlated with the yield of the U.S. Treasury 10-year bond. The 10-year note touched a record low 1.6714 percent on Sept. 23, 2011. As such, mortgage interest rates fell to all-time record lows. Freddie Mac announced that for the week ending September 29, 30-year fixed rates averaged 4.01%, down from 4.09 the previous week.
On 10-05-11 - Treasuries and mortgages were hitting a wall; once again the 10 yr fell to 1.72% yesterday then moved to close at 1.82%; two weeks ago the 10 dropped to 1.67% then ran up to 2.03%. The same pattern is occurring again suggesting that the low rates may have been achieved for the moment. Very volatile action is reflective of the market. We can expect high levels of intraday volatility to continue. As of the writing of this article (10-06-11) Freddie Mac has released the results of its Primary Mortgage Market Survey (PMMS), showing the average rate for the conventional 30-year fixed mortgage dropping below the four percent for the first time in history amid increasing global economic concerns. This week, the 30-year fixed-rate mortgage (FRM) averaged 3.94 percent with an average 0.8 point for the week ending Oct. 6, 2011, down from last week when it averaged 4.01 percent. Last year at this time, the 30-year FRM averaged 4.27 percent. Whether rates can move lower, should not be of concern. Qualifying for today’s low rates however is. Approximately one in four mortgage applicants are denied due to tighter standards from Fannie Mae and Freddie Mac plus Banks are reluctant to make loans without the Fannie and Freddie guarantee; and loans backed by them account for just about every mortgage written these days. Don’t let this historic 30 year fixed rate mortgage loan roll by. Although here today, it could very well, be gone tomorrow. The morale of the story – make hay while the sun shines! |
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