Bacon: Stabilized Fannie, Freddie Will Aid U.S. Housing Market
- Sep 11, 2008
The move by the U.S. government to put Fannie Mae and Freddie Mac into conservatorship will stabilize the two giant government-sponsored entities, said Kenneth Bacon (pictured), executive vice president of housing and community development for Fannie Mae. The result of the government’s move means that the two agencies “are very much in business,” said Bacon, this morning’s keynote speaker at the Cityscape USA conference in New York. The market’s reaction to the government’s actions have been positive, Bacon said. He said that Fannie Mae’s sale of $ 7billion in debt since the actions was oversubscribed. Fannie Mae’s apartment portfolio has performed well overall, he said.Its apartment portfolio’s average loan-to-value ratio is 67 percent, with debt-to-service coverage ratio “north of 1.20.” The apartment sector should benefit from both population growth by new births in the U.S. and by immigraton. “Not everything is roses and honey,” he said. He said when he is asked what worries him he responds with one word: recession. He said cap rates on apartment properties should rise, and said that low rates of recent years were unsustainable, as cap rates in many markets had fallen below the price of debt. The apartment market in some areas also face challenges from the condo meltdown, calling South Florida’s condo market a “bloodbath.” He said some markets, such as Orlando, face challenges from a shadow rental market caused by a weakened condo sector. He said, though, the government has proved it will step in and help the housing sector when needed. “The government has acted forcefully,” he said.