Conservatorship Could Benefit Multi-family

The federal bailout of Fannie Mae and Freddie Mac at the beginning of September may have roiled the markets, but it has a positive side, too: It presents an opportunity to help ease the severity of the housing crisis and strengthen investor confidence, according to a paper by Glev Nechayev, senior economist for Torto Wheaton Research. While multi-family activity accounts for just a small fraction of the government-sponsored entities’ business, these companies have a massive impact on the property sector. They represent more than $300 billion, or 35 percent of the total multi-family debt through their portfolios and mortgage pools, while commercial banks make up 20 percent and securitized issues account for 14 percent, according to the report. However, GSEs or their successors could benefit by at least maintaining and potentially expanding their multi-family efforts, not just next year but beyond, the report states.Industry pundits are carefully watching to see how the Fannie Mae/Freddie Mac conservatorship will impact the multi-family landscape. At the onset of September, third-quarter closed apartment sales reached $4.5 billion, while $6.2 billion in sales were under contract, according to Real Capital Analytics Inc.’s most recent “Capital Trends Monthly” report focused on the apartment sector. These figures had the market on tap to surpass the $9.3 billion in transaction volume pulled in during the second quarter. But the report states, “The uncertainty surrounding the takeover of Fannie Mae and Freddie Mac followed by even greater upheaval on Wall Street has stalled the market.” Other elements also affecting the multi-family market include a seasonal increase in offerings—with September typically strong, although this year the pace has been markedly slower.