With commercial real estate interest rates in Hawaii up 100 basis points in the past 30 days, prices have shifted. The CMBS market will mainly cause a change in the larger institutional transactions. We believe this is a short lived increase and interest will come down by 50 basis points by the end of summer. For more information, please read the article:
CMBS Sales to Be Cut in Half as Rates Rise, Bank of America Says
By Sarah Mulholland – Jul 1, 2013 9:18 AM GMT-1000
Sales of commercial-mortgage bonds will be reduced by half during the last six months of 2013 as rising interest rates impede new lending, according to Bank of America Corp. (BAC)
The bank reduced its forecast for the year by $10 billion to $65 billion, analysts led by Alan Todd said in a June 28 report. Sales of securities linked to property loans have been rising, with dealers arranging $40.6 billion in new transactions this year, compared with about $41.2 billion in all of 2012, according to data compiled by Bloomberg. Wall Street firms are charging landlords higher rates on loans to be sold off as commercial-mortgage backed securities as signs that the Federal Reserve may begin tapering its stimulus program roil credit markets. That’s making CMBS lenders less competitive with insurers and other real estate investors that hold loans on their books, slowing the pace of originations, the Bank of America analysts wrote.
CMBS originators may be pushed to loosen loan terms to win business to make up for being less competitive on rates, according to Bank of America.
Issuance in the $550 billion commercial-mortgage bond market is poised to falter as concern that the central bank will pare its $85 billion in monthly bond purchases this year sends bonds tumbling. The yields on benchmark 10-year (USGG10YR) Treasury notes soared to 2.6 percent on June 25, the highest since August 2011, before declining to 2.5 percent as Fed policy makers including Federal Reserve Bank of San Francisco President John Williams soothed markets by saying it’s too early to curtail bond purchases.