Multifamily Capital Markets Update (April 2020)

The 10-year Treasury Yield has declined to ~.5% after rising to 1.5% in late March. The bond market is beginning to function after a few weeks where spreads blew out and there was no liquidity in the marketplace. Freddie Mac and Fannie Mae continue to quote but with significant reserves required.

Below are key takeaways from the following reports:

COVID-19’s Impact on Multifamily Real Estate – Webinar – Yardi Matrix Link

Download the PDF version of this report here:

COVID-19’s Impact on Multifamily Real Estate – Webinar

Yardi Matrix

  • April collections may be rough with May collections better. Reason? The Fed stimulus will not really kick in until early to mid-April.
  • Fed stimulus includes an additional $600 per week in unemployment insurance, with the average monthly check at $4,000 per unemployed person. This is on top of the $1200 check per person if you make under a certain dollar amount.
  • Cap rates should not move much once the debt markets settle down assuming spreads normalize
  • Topline rents will decrease short term, with some of the west coast markets that had big run-ups as of late showing the largest decreases
  • We went into this with an apartment shortage, we will exit with more of a shortage as construction will be stretched out due to delays, etc.
  • Occupancies will stay where they are, few move-outs and few move-ins. Leases coming due will be month to month.
  • It has been suggested that rents should be frozen where they are at. No need to lower as no one is moving.
  • Private capital/family office money is looking for opportunities and has capital. Institutional Capital (REITs, Banks, Debt Funds, Insurance, CMBS) has pulled back significantly or is currently out.
  • Agencies are funding and loan applications are up. Escrows are being required for the potential drop in collections in the coming months.
  • A and B properties should hold up well short term, workforce housing will be impacted the most
  • Any value-add plans are on hold except for the units that got caught in the middle of a renovation