Mike May, VP of Multifamily Housing for Freddie Mac sees a tough year ahead, but not as bad as it might have been. Thanks to Freddie Mac and Fannie Mae, the multifamily industry was able to stave off the kind of collapses seen in other commercial real estate sectors. The companies comprised about 80 percent of all multifamily business over the past year, helping to keep values relatively stable by providing liquidity.
Freddie Mac’s lending dropped to $16 billion in 2009 compared to $24 in 2008. Part of the reason is because REITs moved toward greater liquidity, assuming that there would be a lot of defaulting properties they could pick up.
However, that didn’t materialize, and May has an explanation: “The reason it didn’t happen is that there was liquidity provided by Freddie and Fannie. So people knew they could get financing, and sellers weren’t as fearful as they otherwise would’ve been. And a couple years out, the picture looks fairly positive in terms of supply. So liquidity and a positive picture in the midterm are the two things that have kept it from getting crazy.”
The delinquency rates will continue to climb in 2010, but May predicts that the differences between buyers’ and sellers’ views of the market will converge, leading to more transactions. You can read the rest of May’s thoughts on the new year here.
Related articles about apartment investing:
- Hot, Cold for REIT IPOs (online.wsj.com)
- Fannie’s, Freddie’s Woes Threatent Apartments (online.wsj.com)
- Tishman/BlackRock Venture in Danger of Default (online.wsj.com)