Consider the present interest rate environment as a window knowing there is no such thing as a window that stays open forever. And, unfortunately but true, sometimes when windows close they slam shut unexpectedly. Financing multifamily holds no special place in the mortgage Eco-system; the same window shuts equally on us also.
Are there commercial loan rate sheets in your email box? Opened them lately? See any changes? Like maybe a thirty basis point increase in rates? How long can interest rates remain at near zero? Are you willing to bet on your selected time table? Too many questions?
Trying to time an interest rate lock at the absolute lowest point is like betting on horses; you know someone is going to win- just not you. So why play? The mass media would have us chase and chase and chase until that pristine moment arrives for locking in the lowest rate ever. Well, when the heck is that? Like just about every financially focused news program; everyone on stage knows exactly when that will occur… after it has occurred.
And while national media fills our head with one potentially fatal financial disaster after another (sub-prime, fiscal cliff, sequester) interest rates have remained relatively flat. From a historic perspective, including the vast majority of humans alive today, mortgage interest rates have never been lower. So why wait? Why wait indeed.
Some are want to say that timing is everything. Timing can also be utilized as an excuse to procrastinate. In our ordinary lives when is there ever time to do something than appears as not pressing? Like earthquake preparedness; how may of us really have ten cases of water at our home?
About the only thing we (borrowers) have on our side is that when interest rates rise the cost to carry the Federal deficit also rises. Why is this a positive. It’s not really, more like an oxymoron. Consider that our Uncle (The United States Federal Government) presently has no incentive to allow for higher rates with the deficit at current levels. But note also that this same Federal deficit, as out of control as it may seem, has begun to decline.
Presently, Uncle Sam can borrow at historically low rates with debt issues being over-subscribed. Consider that the largest holder of Treasury’s is this same U.S. government holding this debt in various pockets (Treasury itself, The Fed, Social Security Trust Fund, etc).
So when will interest rates go up? My best guess is when the Federal deficit decreases enough to withstand making payments on the National debt at higher rates. Please remember that my guess is no better than that of Taylor Swift’s hair stylist. And I don’t bet on horses.
Comment here and tell us about the best loan you ever closed… and about the worst. War stories welcome.
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Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. www.MultifamilyInsight.com