Cronan is the editor of Real Estate Florida
LAKE BUENA VISTA, FL-The nation's multifamily housing sector appears to have plenty of upside during the coming year as excess inventory is absorbed, a group of experts told members of the Mortgage Bankers Association during its Commercial Real Estate Finance/Multifamily Housing Convention & Expo here Monday. "I think there is going to be tremendous demand for multifamily," says Phillip J. Weber, senior VP of multifamily for Fannie Mae and one of four panelists addressing the subject of lending in that property sector.
Weber cites statistics such as anticipated national population growth of 14 million in the next five years, including a good percentage of "echo boomers," who may take up the current excess of residential condominium units on the market. Many metropolitan markets nationwide are showing as much as an 80% supply of condos to work through, he says.
Michael C. May, senior VP of multifamily sourcing for Freddie Mac, says he believes the condo market is "very isolated" from other property sectors and points out that new units being developed in markets such as Miami-Dade County. Although recent rentals of for-sale condos are creating a "shadow market," he predicts sales of units should pick back up as early as the second quarter, and certainly later in the year. "The world will look a lot different in September," May says.
Panelists addressed the contrast in originations for commercial mortgage-backed securities, which ran 30% lower in the second half of 2007 on an annualized basis after being 70% ahead through the first six months. At the same time, Fannie Mae and Freddie Mac originations were up 49% during the latter half of 2007 after being up 18% during the first half of the year. If the CMBS market doesn't bounce back in the next two years, other product types are likely to be explored, says Sam Davis, senior managing director of Allstate Investments LLC.
A report released Monday morning by the Washington, DC-based MBA states that loan originations for commercial and multifamily mortgages were down 16% in last year's fourth quarter from the same period in 2006. However, multifamily originations declined only 7% during that period, while other sectors experienced deeper decreases: 73% for office, 50% for industrial and 38% for retail.
The panelists agree that a slowdown might be necessary to rebalance the markets, especially given that the last multifamily boom lasted more than twice as long as the typical seven-year cycle. "We've been going full guns, full bore for 15 years," says Kieran Quinn, chairman of Column Financial Inc. "A pause isn't going to kill anybody."
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