A Tough Road Ahead

November 1, 2018                                By: Donna Kimura

Interest rates, costs continue to rise for developers.

All eyes will be on interest rates as the calendar turns to 2019.

The Federal Reserve raised its benchmark interest rate a quarter point, to a range of 2% to 2.25% near the end of September, the third hike this year. Additional increases are also expected in the months ahead.

Columbia Residential recently opened Columbia Renaissance Square, a mixed-income development in Fort Worth, Texas. The first phase has 140 units, and a second phase contains 120 units of seniors housing. The Atlanta-based firm owns approximately 8,000 housing units.

“Interest rates have continued to increase, and the yield curve has flattened,” says Richard Gerwitz, co-head of Citi Community Capital. “Those are the two outstanding changes in the capital markets this year. While we’re still in a relative low point if you look over the last 30 years or more, rates have climbed and there’s certainly concern that the trend will continue.”

He points out that the 10-year Treasury is cracking 3%, compared with about 2.3% a year ago, a 70–basis point increase...............Read More