DSCR Loan Update - December 2024

Published: December 12, 2024

Introduction

Hello fellow rental property investor and welcome to our December 2024 DSCR loan update. My name is Daniel Sperling-Horowitz with OfferMarket, and I’d like to start by wishing you and your loved ones a happy and healthy holiday season!

Credit Spread Increase

The biggest news to share is about Credit Spreads. DSCR loan interest rates are calculated by adding together the 5 Yr US Treasury (“risk free rate”) and a Credit Spread (“risk premium”).

Credit spreads are based on several factors including:

• LTV
• credit score
• DSCR
• prepayment penalty
• property location (i.e. judicial or non-judicial state)
• property type (i.e. # of units)

The most competitive capital providers that purchase DSCR loans originated by OfferMarket have increased their credit spreads by just under a quarter percent. Based on our market intelligence, OfferMarket DSCR loans remain the most competitively priced in the market.

Essentially, these capital providers now demand a higher premium above the 5 Yr US Treasury. There could be a multitude of reasons and we will continue to monitor and share insights on this important topic.

CPI and PPI Inflation Reports

Yesterday’s November CPI report showed the annual inflation rate at 2.7%, a month-over-month increase of +0.3%. This was in line with estimates.

Today’s Producer Price Index report showed wholesale prices increased 0.4% month-over-month, this was hotter than the 0.2% estimate.

In response to this fresh economic data, the 5 Yr Treasury has increased from 4% to just under 4.2% over the past week.

Fed Funds Rate and DSCR Loan Rate Prediction

Despite these reports which indicate inflation is still a long way from the Fed’s 2% target, the futures market is predicting a 98.5% probability that the FOMC cuts the fed funds rate by 0.25% at next week’s meeting on December 18th.

We believe a 0.25% rate cut by the Fed is already priced into the market. We do not anticipate DSCR loan interest rates to move lower if a 0.25% rate cut indeed occurs. However, if the Fed leaves rates unchanged, we think that will cause the 5 Yr Treasury to rise.

Whether you’re looking at inflation, housing, geopolitics, there remains a lot of uncertainty in the market and we do not expect that to subside in the near term.

Off Market Listings

We continue to see attractive 1-4 unit rental property purchase opportunities both on-market and off market. Inventory on our investment property marketplace continues to grow and now stands at 577 off market listings. If you aren’t subscribed to our off market deal flow, head on over to offermarket.us/listings

Thank you for tuning in! If you found this update helpful, please take a moment to like this video, subscribe to OfferMarket on Youtube and get your instant DSCR loan quote today!