The multifamily industry, he pointed out, is better off in many ways than other more volatile markets, since Fannie Mae and Freddie Mac are providing liquidity to roughly 90% of the market. And although an estimate of $60 billion of loans will mature in the dreaded '09-'10 timeframe, that is a fraction of the total predicted $800 billion coming to term for the rest of the industry.
Rising delinquencies have not over-taken the market significantly just yet and although apartment values are down, it's only 20% over 2009, he explained. The a primary issue facing the industry will be how Fannie and Freddie are treated over the coming months, with too many demands being placed on them, the government will have to narrow down what it wants out of them and find alternatives for the rest.
Bibby joined the panel "Where Are the Multifamily Opportunities in a Distressed Market?" moderated by Linwood Thompson, SVP and managing director of Marcus & Millichap's multi housing group. The panel consisted of Ernst & Young's Steve Friedman, Essex Property Trust's Keith Guericke, Jack McCabe of McCabe Research & Consulting, MacFarlane Partners Greg Vilkin and Tim White of PNC ARCS.
Guericke looked at the problem from the bottom up, in that buying multifamily property presented a problem in that it is "hard to gauge cap rates because there are so few transactions". Moreover, he wagers that the bottom won't happen until the first half of 2010, therefore the industry won't see banks sending a lot of property to the markets, they will more than likely opt to extend loans as opposed to taking the properties over.
Speaking regionally, McCabe addressed another conundrum facing the sector with a "depleted rental pool." The overdevelopment and conversions to condos is rearing its head now. Using Miami, an epicenter of this predicament, as an example, McCabe pointed to 22,000 new condos downtown staring down 40% vacancy, but he sees few deals and predicts a mushrooming of the shadow market as condos default and come into the market as rentals.
Friedman looks to some of the better signs, as well, pointing to a few markets that are rebounding, such as Washington, DC; Southern California--coastal, not inland; and areas of the sunbelt, particularly Texas. The areas still barely alive, however are Phoenix, major Florida markets and Las Vegas.
There are "homeowners walking away from homes," he said, and renting for less across the street. Companies are figuring out, he said, that it's sometimes better to have someone "pay the electric bill and mow the lawn" than having an empty house.
McCabe sees a paradigm shift with these homeowners getting burned and seeing a future crop of renters, as Bibby points out the growing margins of Echo-boomers and nontraditional households which will need a broader variety of housing moving forward.
To attend the full virtual conference and hear more insight and predictions from industry experts on investing and maintaining in the multifamily market, click the link below:
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