Institutional leaders continue to avoid real estate.Institutional lenders continue to avoid real estate The average mortgage rate for commercial real estate in Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, during the second quarter of 1990 dropped to 9.75 percent from 10 percent during the first three months of the year, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Brian Stoffers, regional manager of Coldwell Banker Commercial Mortgage Banking Services. Stoffers last week said shorter term mortgage rates (three to five years) ranged from 9.5 percent to 9.75 percent during the second quarter and longer term rates ranged from the high 9 percent mark to the low 10 percent range. Shorter term mortgage rates last year ranged from 8.875 percent to 9.125 percent with long-term transactions in the 9.25 percent to 9.50 percent range. Commercial loan volume among institutional lenders nationwide in 1990 continues to drop, said a Coldwell Banker newsletter. This is the third year in a row that volume has been on the decline, the newsletter said. The newsletter said 1987 was a record year in terms of volume for commercial loans but since then there has been a steady decline. "Most institutional lenders have more than adequate liquidity and cash flows," said Stoffers. "But managers controlling this money are allocating it away from commercial mortgages into corporate private placements and publicly traded bonds. Regulators rating agencies and shareholders are generally in favor of upon the side of; favorable to; for the advantage of. See also: favor fewer dollars for mortgage allocation." He said institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. are looking at "quality" rather than "quantity" in commercial loans, which has resulted in lower volume. "The money is there but the lenders are being a lot more careful. "The yield is better and there is less risk involved in private placement or bonds," he said. The end result of the movement away from commercial loans is that there could be a credit crunch Credit Crunch An economic condition whereby investment capital is difficult to obtain. Banks and investors become weary of lending funds to corporations thereby driving up the price of debt products for borrowers. later in the year, Stoffers said. "Last year's commercial mortgage market was characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by lower rates in the second half with adequate cash flows to service demand, albeit with much slower response time," he said. "A similar decrease this year could result in a stampede stam·pede n. 1. A sudden frenzied rush of panic-stricken animals. 2. A sudden headlong rush or flight of a crowd of people. 3. , which might result in lenders running out of loanable funds." He said some institutional lenders have widened the difference between mortgage rates and those on U.S. Treasury U.S. Treasury Created in 1798, the United States Department of the Treasury is the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills. Some of the government branches operating under the U.S. Treasury umbrella include the IRS, U.S. bills or similar maturities. "This has been done in an attempt to stem demand and compensate for the increasing perceived risk factors of commercial mortgage lending," he said. |
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