Fannie Mae Predicts Softer Multi-Family in Some Markets

Fannie Mae is mostly optimistic about the state of the multi-family industry in 2015 and beyond, but it doesn't foresee quite the same kind of boom as in the last few years.

Fannie Mae is mostly optimistic about the state of the multi-family industry in 2015 and beyond, but it doesn’t foresee quite the same kind of boom as in the last few years, mainly because some markets are going to suffer softer fundamentals in the wake of the rapid rush to develop new properties. The predictions were released on Friday in Fannie Mae’s latest Form 10-K, which is a sprawling document and largely concerned with its single-family mortgage business, but also partly devoted to the GSE’s multi-family activities.

Among the 340,000 new units that Fannie Mae predicts will come on line in 2015, most of them will be concentrated in a limited number of U.S. metro areas, the company says. “Our expectation [is] that, despite steady demand and stable fundamentals at the national level, the multi-family sector may continue to exhibit below average fundamentals in certain local markets and with certain properties,” the GSE noted. Specifically, there could be a temporary slowdown in net absorption, occupancies, and effective rental increases in those markets as a excess of apartments come on line.

Still, the GSE predicted that the overall national rental market supply and demand will “remain in balance” over the longer term. That’s based on expected completions of new properties, as well as the number of properties that will disappear because of obsolescence in the coming years. But the main driving factor for the multi-family market — and it’s a good one — is the anticipated increase in the population of 20- to 34-year-olds, who are the primary age group that tends to rent apartments. The more Millennials and post-Millennials, the better, and there are a lot of them coming of age.

Fannie Mae also reported some more-or-less good news on Friday about the number of seriously delinquent single-family mortgages that it holds — namely, that the number was far down in the fourth quarter of 2014, about 25 percent off since the same quarter a year earlier. Despite the relatively sluggishness of the housing market lately (sales that are slow, appreciation that’s slow), that points to a more normalized market. The fewer REOs, the better, especially for certain kinds of commercial real estate (retail in particular), though in some states lengthy foreclosure periods are part of the reason for the lower delinquency rates.