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Q4 Capital Markets Update

published October 5, 2022

The Fed's Fight

The Fed has not raised rates more than 75 basis points in an entire year since the 80's.  They've raised rates by 75 basis points three times so far this year and have signaled another 125 basis points by the end of the year.  The yield curve remains inverted.  The big question is how quickly inflation will course correct to normal levels.  Until we see real signs of this, the Fed will continue to raise rates into 2023.  


Below are anticipated rate increases for the remainder of the year:

Date                  Increase           Implied Fed Funds

Nov 2nd              0.75%                         3.75%

Dec 14th             0.50%                         4.25%

Real estate volume is down as deals become harder to underwrite with the new financing realities of negative leverage.  For value-add deals, interest reserve holdbacks, SOFR Cap costs, and widening spreads are contributing to a more hesitant buyer pool.  This has led to price reductions in most all markets.  

Lender Overview:

Banks and Credit Unions remain competitive with rates in the mid to high 5% range, although many are limiting interest-only and increasing debt service coverage requirements.  Alternative private lenders and funds remain an attractive option to lock in fixed rates and creative structures to maximize proceeds.  Fannie Mae and Freddie Mac's inability to rate-lock at a signed application for loans over $6 million exposes deals to fluctuations in treasury rates which impacts loan proceeds at final underwriting.  Life Companies and CMBS are less compelling today, although still winning business for the right deals where better options do not exist. 


Many bridge lenders who rely on the CLO secondary markets remain on the sidelines, which has pushed out spreads even further to 4.50%+ over Term SOFR, making value-add bridge deals even harder to underwrite,


Floating Rates:

The forward curve looks drastically different from a month ago.  Instead of a peak at 4.0% followed by a sharp decline, it now peaks around 4.40% and stays above 4.0% until March 2024.  This has real implications for all floating rate borrowers, and the reason fixed rate alternatives have become compelling.

Forward Curve - 10.05.2022.png

Rate and Economic Indicators

  • 10 Year Treasury at 3.76% after peaking over 4% last week:  The forward curve is now pinning the 10-year around 3.60% for the next couple of years.

  • Term SOFR up to 3.11%:  Forward curve predicts a 4.40% peak by February 2023. 

  • NY Fed Inflation Expectations down:

    • 1 Year median expectation:  5.7%​

    • 3 Year median expectation:  2.8%

Rates Today

Fannie Mae & Freddie Mac spreads are 2.0% +/- 25 basis points based on size, affordability, and green waivers.  

Life Companies have allocated away from real estate with their rates relatively less competitive.

Banks and Credit Unions are quoting deals with spreads of 1.40%-1.80% over the SWAPS.

Bridge Lenders are thinning out, but still quoting deals with spreads in the 4.50%-5.0% range over Term SOFR.







10-Year Fixed


5.50% - 6.25%

45-60 days

LTV & DSCR dependent


10-Year Floating


5.0% - 5.50%

45-60 days

LTV & DSCR dependent

FHA Refinance

35-Year Fixed


5.75% - 6.45%

120-150 days

includes MIP

Life Insurance



5.60% - 6.10%

40-50 days

DY dependent

Bank, CMBS, &
Credit Union


5.60% - 6.20%

45-60 days

DY & term

Debt Funds 


7.50% - 8.50% +
Spreads of 4.50%+

14-45 days

LTC & stabilized DY dependent



6.75% - 8.50% +

45-60 days

LTC & size

Recent Financings

Recent Financings


Value-Add Multifamily
Lincoln City, OR

60% LTV, 5.12% rate locked at signed App 

5-Year Fixed, Full-term Interest-Only

Flexible step-down prepay


Recent Financings

Buford Duplexes exterior image3.jpg

50-Units non-contiguous
Buford, Atlanta, GA

$5,10 Million Value-add Bridge Loan

75% LTV, 30-day closing

Fixed rate locked at signed App 

Structured as 25 separate loans for each parcel to allow for best refinance options.

No interest reserve

Tim Gerlach Headshot - smile.jpg

Tim Gerlach, CPA  |  Principal

CPA Lic. 130463  |  Broker Lic. 02038912

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