Monday, February 23, 2015

The SBA and pervicacious

Very stubborn.
From Latin pervicax (stubborn). Earliest documented use: 1633.

Nothing pervicacious about commercial real estate.

According to CoStar, commercial real estate prices are up over 10% from last year.  

Real estate has also recovered from the recession with prices now above the previous peak in 2007.

This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at December 2014 commercial real estate pricing. Based on 1,672 repeat sales in December 2014 and more than 130,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity. 

Let me know if you would like a copy of CoStar’s February 2015 CCRSI release.

SBA loans can be used for commercial real estate purchases and refinances.


SBA LIBOR Base Rate February 2015 = 3.17%
SBA Fixed Base Rate February 2015 = 4.75%
SBA 504 Loan Debenture Rate for February      

The debenture rate is only 2.46% but note rate is 2.51% and the effective yield is 4.546%.       


Do you think interest rates are being pervicacious?

Many people think that the Federal Reserve will soon shed their pervicacious ways and start raising interest rates soon.

Minutes from the last Fed meeting on monetary policy however noted something different.   It sounds like rates might stay lower longer than a lot of people think.

One of the Fed’s favorite gauges of the economy is the capacity utilization rate which measures how much plants and factories are being used.  The Federal Reserve watches capacity utilization rates to see if production constraints are threatening to cause inflationary pressures. Bottlenecks or shortages often lead to inflationary pressures that would drive prices even higher.   Several analysts have pointed to a rate between 81% and 82% as a tipping point over which inflation is spurred.  The Federal Reserve typically won’t initiate increases in interest rates until then.

Here is what capacity utilization rates have done:

1997- 83.6
1998- 83.0
1999- 82.4
2000- 82.6
2001- 77.4
2002- 75.6
2003- 74.6
2004- 79.2
2005- 80.7
2006- 82.4
2007- 81.5
2008- 79.9
2009- 66.9
2010- 74.8
2011- 76.7
2012- 79.0
2013- 77.8
2014- 78.8

Last week the Federal Reserve reported that capacity utilization was unchanged in January at 79.4 percent.

What does this mean?

I don’t know.

While up 12.5 percentage points from the record low set in June 2009 it is still below the pre-recession level of 80.8% in December 2007.

The Federal Reserve can continue to be pervicacious about interest rates.

The most pervicacious people in the world just might be Cubs fans.
The Cubs have not been to the World Series since 1945 and have not won a World Series since 1908.
The Cubs will win the 2015 World Series, at least according to the 1989 movie Back to the Future 2.

Only 13 days to daylight savings time and 42 days to Opening Day.

No comments:

Post a Comment