Interest rates for permanent multifamily loans in the US have dropped between 20 and 30 basis points since the start of 2017. This has opposed the expected increase.
The downward trend in rates applied to most types of apartments in the country. For investors, the low rates may also cover HUD multifamily loans, according to industry experts from Bonneville Multifamily Capital. The declining rates stem from a persistently uncertain federal policy.
At the same time, demand for properties remains high. It allows borrowers to choose from different financing options. Some real estate companies believe that this trend provides investors with a chance to secure low-cost capital funding for an acquisition or a refinancing project.
On the other hand, competition from lenders has become stronger. Companies have strived to offer the best deals to investors. A caveat, though, involves borrowers being subject to a stricter underwriting process in the past six months. The tighter process occurred as lenders became skeptical of the low cap rate trend, which will cause underwriting standards to remain strict.
Multifamily housing starts in the US dropped in July amid the continued low rates for apartment loans. This is according to the Commerce Department. The drop may explain the increase in demand from buyers, as housing starts fell 4.8% to 1.16 million units.
Some economists described the lower number of housing starts as a surprise. For instance, Citigroup economist Andrew Labelle expected the residential sector to rebound from a weak second quarter. However, a robust level of employment growth would allow the housing market to recover in the future.
Analysts expect interest rates to continue falling in the near future. Have you chosen a multifamily loan type for your next investment?