Apartments Maintain Performance Levels

Commercial and multi-family mortgage delinquency rates as a group experienced minimal increases during the second quarter but continued to perform well, according to a report from the Mortgage Bankers Association. The multi-family sector, specifically, saw $1.489 billion in delinquencies in June, according to data from Standard & Poor’s Corp., barely up from $1.485 billion in March. Fannie Mae and Freddie Mac, which hold more than 80 percent of commercial and multi-family mortgage debt outstanding, saw minimal delinquencies, with just 0.11 percent of Fannie Mae’s loans 60 or more days delinquent and 0.03 percent of Freddie Mac’s at that level, according to the MBA. And those rates represented very slight moves from the first quarter, with Fannie Mae’s rate increasing by 0.02 percentage points and Freddie Mac’s dropping 0.01 percentage points. That is particularly good news given the difficulties the government-sponsored enterprises are currently undergoing.  Cap rates were up for garden apartments in the second quarter, according to Real Capital Analytics, which measures data for properties and portfolios that are valued at $5 million or greater, but down for mid- and high-rise properties. Garden apartments saw  a 19.8-basis-point change over the first quarter and a 33.1-basis-point change over the same period a year ago. Mid- and high-rises experienced a 9.6-basis-point drop over the first quarter but a 20.8-basis-point rise over last year’s second quarter.From the property performance perspective, the outlook is good. Although multi-family vacancy rates should increase from 5.4 percent in the second quarter of this year to 5.9 percent in the same period next year, according to the latest Commercial Real Estate Outlook by the National Association of Realtors, the sector, which is experiencing relatively solid demand for rentals, is expected to see average rent rise 3.9 percent this year and 4 percent next year, up from a 3.1 percent uptake last year. Net absorption should reach 61,400 units this year and 188,200 next year, although that is down from 2007’s level of 234,400 units.