Latest On Jumbo Loans & Commercial Real Estate

For those out there rooting for the non-agency (jumbo) market to come roaring back, there is a step in the right direction. Pricing engine Optimal Blue has released Redwood Trust’s Jumbo Fixed and ARM products. Redwood has seen a solid increase in their number of clients, percentage-wise, in the last year, and with good reason. At this point Redwood Trust appears to be the only issuer of new home-loan securities without government backing in quite some time, and last week Fitch announced it will be rating a Redwood pool ($375 million of jumbo mortgages, average balance of $793k, 80% from First Republic Bank & PHH).

Residential and commercial real estate are often loosely tied together, although commercial real is usually much more of a “numbers game.” Capitalization rates have been found to be good indicators of expected returns in commercial properties, and the SF Fed points out that recent declines in these cap rates appear to be signaling a commercial real estate rebound, indicating improved investor expectations of price growth in the market. It is good to hear, and I hope that they’re correct.