Following two years of sharp contraction, multifamily and commercial real estate credit markets have shown fresh signs of life in recent months, according to Real Capital Analytics.
Consistent with Q1’s year-over-year increase in sales volume, financing for new transactions—as well as refinancing activity unrelated to distress—has picked up from last year’s trough, albeit at lower leverage than at the 2007 peak in investment. A diverse list of active lenders from Q4 of 2009 and 2010 to-date reflects this measured uptick in investment activity as well as a changing mix of market participants.
Facing loss management issues of a different sort, the government-sponsored enterprises—Fannie Mae and Freddie Mac—continue to experience record-setting losses in their single-family housing portfolios. Fannie Mae reported last week that it was seeking $8.4 billion from the Treasury Department to cover net losses in the first quarter. Across the two GSEs, losses offset by the public purse now total $145 billion.
While the GSEs continue to play a critical role in supporting the multifamily investment market, their role has diminished relative to last year and their peak year in 2008. In part, this shift reflects the readiness of a broad array of lender groups to extend credit in the multifamily sector, given more optimistic projections for its property fundamentals.
The GSEs’ multifamily portfolios remain relatively very healthy, with delinquency and default rates that are only a fraction of banks’ multifamily default rates, in spite of these loans generally being made at the highest loan-to-value ratios (0.75 in 2009) of any lender group.
Source: Real Capital Analytics’ May 13 e-Newsletter