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Real Estate Capital Market Report - August 2006 Edition


CHICAGO, July 31, 2006 – Providing relief from record-high temperatures, realty markets remain cool as mortgage rates edge down. Key observations are:

1) The market closed the July with the benchmark 10-year Treasury at about the same levels as early June. However rates gyrated throughout the month with a variation of about 20 basis points. As compared to a year ago, treasuries are about a half point higher.
2) Mortgage spreads over treasuries are unchanged.
3) Overall mortgage rates are within the 6%-to-6.625% range for five-year and longer permanent loans. Such rates are based on pricing of 100 to 160 basis points over ten-year treasuries and reflect conventional properties with full leverage (e.g. 75-80% LTV).
4) Smaller loans of $5 million or less are priced within the 6.25% to 6.75% range as are longer-term, self-amortizing loans of 15 years or more (non-credit tenants).
5) While interest rates continue rising, income-property assets are maintaining strong values. In particular, office buildings and apartment properties are rapidly recovering. Investors are banking on cash-flow upside.
6) CMBS loan performance staying solid. Competition remains keen, particularly for lower leveraged, high-quality loans. Pricing on such debt translates to as low as 80 basis points over the comparable-term treasuries (i.e., 5.80%).

Hourly rate updates are available by calling the Institute’s automated Real Estate Capital Rateline at 7RE-CAPITAL (773-227-4825). For further daily, monthly and annual mortgage rate information, please visit the Institute online at


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