Multifamily capital markets trends in October remain stable despite the drop off in volume from Freddie Mac and Fannie Mae due to self-imposed caps. In September, FHFA came out with guidance for the agency lenders which, in turn, increased the volume of quoted senior loans.
Below are key takeaways from the following reports:
US Marketflash – CBRE – Link
A Closer Look at FHFA's Guidance for Multifamily – NMHC – Link
Multifamily Capital Markets Update – Cushman & Wakefield – Link
Jeffery Howard on Facing Down the National Affordable Housing Challenge – Commercial Observer – Link
- Spreads continue to hold firm or tighten slightly in the 2Q despite agency pullback
- Underwriting remains stable or slightly more conservative compared to the last 3 years
- 10-year treasury is predicted to hold below 2.0% until 2021 with moderate GDP growth
- Investment velocity for all asset classes declined the 1st half of 2019 vs. 2018
- Cap for both agencies is set at $100MM for 5 quarters 2019-2020, which is estimated to be 41% of the total market
- 2019 cap is eliminated and rolled into the 5-quarter limitation
- Cap is inclusive of affordable; no cap exclusions for green or affordable
- Affordable requirement is 37.5% of the entire cap
- The guidance is for both Fannie Mae and Freddie Mac
Cushman & Wakefield
- Real estate capital raised fell in the 2Q of 2019 to $29B, down from $38B
- Multifamily transaction volume increased by 11% YOY
- Average sales price per unit is $167,000, up 10% YOY
- Interest rates and spreads remain volatile as the agencies reprice coming out of their self-imposed cap and yield moves on a daily basis seem to be more significant
- Jeffery Hayward, head of multifamily lending at Fannie Mae, commented the lack of affordable housing is attributed to a lack of supply
- The supply issue is a result of many factors, each unique to every market. One solution will not necessarily translate from one market to another.
- Rent control is only a reaction to the underlying problem of supply. Rent control will not produce a new unit and deter new supply.
- Employers in high priced markets are taking a more active role in affordable housing as it’s needed for the employees on the lower end of the wage spectrum