August 30, 2008

Housing Markets; One Bright Spot

Apartment Demand Holding Up But Capital is Hard to Find

Overall, apartment demand is holding up fairly well. Sales volume is down and credit is tight, but Fannie and Freddie have been increasing their exposure in this one relatively bright sector of the housing markets.

Better Renter Profiles

The housing crises has actually helped the apartment sector since less renters have been leaving to buy homes. This is raising the credit quality of rental applicants and helping buoy the apartment sector. You now see people with six figure incomes renting one and two bedroom apts and waiting out the storm. No doubt, hoping to catch the bottom.

Good Market Demographics

The demographics are in favor of rentals as we experience a new generation of renters coupled by the fact that this sector didnt over build the way homes and condos did. High oil prices will continue to drive people to cities and that will also keep demand high.

Fannie and Freddie Agree

Fannie and Freddie have noticed and are trying to repair their balance sheets by adding properties from the apartment sector. They have been looking to finance more multi family properties and re-balance their portfolios in favor of rentals. They don't actually lend to borrowers but buy pools of loans from lenders that follow their guidelines.

Tight Capital

The main problem for rental property investors is that the two govt agencies are one of the few capital pools left. With so many lenders out of the game, lending activity for multifamily property loans fell 42% year over year, according to the Mortgage Bankers Association's (MBA) latest Quarterly Survey.

According to Multi "Housing News: For now, there is no major disruption to the stream of Fannie Mae and Freddie Mac permanent, acquisition and rehab financing supplied to the multi-housing sector, although in general underwriting is tighter, loan dollar ratios may be lower, and pricing is higher".

Tight times, no doubt. But not the rout we see in other sectors.

Thanks for Reading
Howard Bell
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