Market Update Q1, 2018
January 11, 2018

It is a new year and the market for commercial loans continues to be ever-changing. The following are market trends that have been identified by Barry Slatt Mortgage.

  1. Interest rates for long-term fixed-rate loans continue to remain at all-time lows. While adjustable rate loans based on U.S. Prime and LIBOR have continued to adjust upward, interest rates for benchmark 10-year fixed-rate loans have remained low in the 3.75-4.75% range.
  2. Markets for the major loan segments remain quite liquid:
    The CMBS market was stable in 2017 and is expected to continue its strength in 2018. Issuance in 2017 reached approximately $95B compared to approximately $75B in 2016. According to a 1/5/18 article in Commercial Mortgage Alert, “…securitization lenders are still generally bullish about the outlook for 2018.”

    Life Insurance Company
    Life Insurance companies are optimistic about 2018. Insurance companies are “asset allocation” lenders and compare their investments returns in commercial loans to those in bond and other conservative investment markets. Relative yields are currently higher in commercial real estate loans than in high grade bonds. Consequently, insurance companies are finding value in making commercial real estate loans.

    Banks are predicting a stable year in 2018. According to a 1/5/18 article in Commercial Mortgage Alert, “Balance sheet lenders are expecting another year of steady production and increasingly higher competition.”

    Agency lenders are forecasting another strong year for 2018. While Fannie Mae and Freddie Mac may tap the brakes slightly on their originations, they still plan to lend at a brisk pace.

  3. Most major MSA’s throughout the United States remain attractive origination grounds for lenders. According to the MBA 2018 CREF Outlook Survey, “nearly four out of five of the top commercial/multifamily firms expect originations to increase in 2018, with almost one-quarter (22 percent) expecting an overall increase of 5% or more across the entire market”.
  4. High liquidity in the market has created flexible terms for borrowers. Loans are currently available with features such as flexible prepayment penalties, interest only (when leverage permits), and high leverage.
  5. It is still important to use the right mortgage bankers to assist you in the placement and securing of your loan.