What impact does the U.S. credit rating down grade have on the student housing industry?
What impact does the U.S. credit rating down grade, European bank crisis and widespread fears of a double-dip recession have on the student housing industry, specifically financing for student housing investment and development deals?
“The capital markets have experienced unprecedented swings in pricing this past week. Even with the market volatility, it’s still business as usual at Freddie Mac. Our doors are open and we are rate locking and purchasing loans. We even settled a K Certificate multifamily mortgage backed security recently and all investors remained in the deal. We operate in all market environments and are a reliable source of capital.”
— Rich Martinez, managing regional director, Production and Sales — Southeast, Multifamily, Freddie Mac
“The U.S. sovereign credit rating downgrade has caused 10-year U.S. Treasury yields to decline causing the interest rates for permanent financing with Fannie Mae, Freddie Mac and life insurance companies to decline to some of the lowest rates seen to date. These low rates have caused borrowers to bombard Fannie Mae and Freddie Mac with rate lock requests during the past few days. With the drop in Treasury yields, Fannie Mae and Freddie Mac have increased spreads to offset the drastic drop we have seen since last Monday (August 8). CMBS lenders are bunkering down during this volatility and not aggressively originating or closing new business this week.”
— Timothy Bradley, TSB Capital Advisors
“In general, the credit downgrade and related fallout has not affected our businesses at all. It has probably served to drive more capital into the market, which will be both good and bad. The biggest impact would be if Freddie Mac or Fannie Mae were forced to stop lending, change policies or dramatically raise spreads. I doubt that will happen, however.”
— Andy Hogshead, chief operating officer, The Collier Companies
“There is a positive relationship between low interest rates and low cap rates. The fed action increases the likelihood that cap rates will remain flat for the next year, increasing the values of all real estate, especially student housing, because of the demand. Stock market uncertainties may drive additional capital into the student housing space, which will drive cap rates even lower. Debt uncertainties may halt some of the unbridled interest in student housing development, which can be a good thing.”
— Donna Preiss, founder and chief executive officer, The Preiss Company