Central Ohio Real Estate Market Finance Watch - Spring  2013

Three quarters of the financing volume seen in Ohio has been refinancing of existing assets.  With almost 60 percent being for multifamily propertiesThe market in Central Ohio has been very strong partly due to large developments and investments. From a real estate financing and mortgage perspective, with interest rates dramatically below usual norms for both construction and more permanent loans, this continues to be an opportunistic time for property owners to finance or refinance their assets and projects.  Three quarters of the financing volume seen in Ohio has been refinancing of existing assets.  With almost 60 percent being for multifamily properties means half of all financing has been to multi-family owners taking advantage of very low rates.  Industrial properties show considerable resilience in Central Ohio with average vacancies of less than 8 percent on newer industrial product.

Focusing on multi-family assets has brought a plethora of financing options to weigh against the strategic investment criteria of multi-family owners.  With occupancy levels averaging 95 percent to 97 percent, rents increasing and the supply of new product barely keeping up with the current demand, multi-family housing finance has been at an all-time high in Ohio.  Ginnie Mae securities backed by FHA loans have had interest rates below 3 percent for more than three years.  Adding in the mortgage insurance premium of 40 to 60 basis points to FHA, we have still consistently seen the annual cost of borrowing hover between the mid-2-percent and lower-3-percent range.

Many property owners who would have never been interested in a HUD 223(f) acquisition or cash-out FHA loan product are taking advantage of them now.  Despite the additional time compliance requirements, they have low interest rates and amortization schedules of up to 35 years and cannot be matched in the market place.  Many of these properties are considered luxury Class-A assets, not the B- and C- class or affordable properties that most borrowers might picture. Some of the compliance requirements for FHA loans include annual accounting audits, property inspections by HUD and ongoing additional capital reserves. There has also been great interest in the use of HUD’s 221(d)(4) construction program for multi-family construction.  With 40-year amortizations and fixed rates below 4 percent for the loan term, it is an attractive program for 10- to 12-month closings.

Freddie Mac and Fannie Mae's attractive products that seem to be a favored choice for property owners with a 10-year perspective on ownership or those who want to maintain flexibility over the leverage on their assets.  Freddie Mac has been successful in our markets with multi-family loans larger than $8 million. With flexibility provided by Freddie Mac has been a competitive choice for Real Estate Investment Trusts and private multi-family operators.  A typical loan is for 10 years with a 30-year amortization, and rates with spreads roughly 185-205 over 10-year treasuries depending on its asset structure. Fannie Mae rates are similar to Freddie Mac's, though typical Fannie Mae loan are around $5 million and, since Fannie Mae is lender risk sharing, there's more flexibility in structuring the underwriting of loans.

As the Federal Reserve continues to hold down interest rates and with no immediate threat of inflation on the horizon,  property owners will continue to take advantage of unusually low rates. Property owners are taking more of these cheap rates knowing that we will tend back toward normal at some point.  In Central Ohio, we expect the real estate market to continue to be robust and capital to continue to be more available to real estate owners.

 History of Borrowing

You don't have $175,000 in cash lying around? Then chances are your purchase of a home will depend on your ability to borrow 80 percent or more of the money you'll need.

Borrowing the norm

Before the 1929 stock market crash, cash purchases of homes were the norm. Or if money was borrowed, it was on a term that typically didn't last much more than five years. That made payments relatively steep, which is part of the reason so many homes were lost in the Great Depression.

After World War II the U.S. government created a mortgage program that allowed veterans to make affordable payments over a 30-year period.

Today's of choices

Today, the 30-year fixed-rate mortgage, while still the most common way to buy a home, is just one of many financing options available. Indeed, many mortgages today are almost custom-tailored to individual needs.

Mortgage lending is a highly competitive field. Information on mortgage rates, which can change daily, is available in local newspapers, through mortgage brokers, and from individual lenders. When you're shopping for a loan, interest rates tell just part of the story. You'll also need to study the various fees lenders charge.
 Read about new mortgage rules issued this year.

Central Ohio Real Estate Market Finance Watch Finally, for borrowers who do stay in their home after their fixed-rate period expires, there are ceilings on how much their rates can rise each year and over the life of the loan. Moreover, they always have the option of refinancing their mortgage if rates move up.

Feel free to call me to discuss your best options (740) 345-7748
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Contact Us

294 Mt. Vernon Road
Newark, Ohio 43055
Mobile: (740) 404-7003
Office: (740) 345-7748
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BPOR, Broker Price Opinion Resource
SFR, Short Sales & Foreclosure Resource
e-PRO, National Association of Realtors