In our June 9 post, we noted that equity levels were dropping for the four major property types. This post takes a different look at where equity levels are falling on Scotsman Guide Loan Post. The chart below shows average loan-to-value (LTV) amounts by loan size for the past 17 quarters.
This past first quarter, average LTVs for loans $5 million and more jumped 6 percentage points over the previous quarter to end at 63.6. In contrast, average LTVs for loans $1 million or less hovered near their all-time low, ending at 58.2. In other words, borrowers were bringing less equity to larger loan deals in the most recent quarter.
Last month, we noted that trophy properties and certain markets continue to lead the recovery while the majority of the commercial real estate market continues to struggle. Given that we may be starting to see some deterioration in underwriting standards for those trophy properties/markets, commercial mortgage originators may want to start focusing on some of the Class-B properties that are beginning to hit the market.
— Dan Yeh