freddie mac multifamily market update · 2017-09-18 · sources: freddie mac 10-ks, 10-qs, fhfa...
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Market Insights on Community Development | September 12, 2017
Freddie Mac Multifamily Market Update
Steve GuggenmosFreddie MacVice PresidentMultifamily Research & Modeling
Mark DeanCiti Community CapitalManaging Director, NationalProduction Manager
Citi Community CapitalCiti Community Capital
Your Webinar HostMark DeanCiti Community Capital, Managing DirectorNational Production Manager
Mark Dean is the National Production Manager for Citi Community Capital withover 28 years of experience providing investment banking and mortgagebanking services to real estate developers and corporate sponsors.
Phone: 206-346-2838Email: [email protected]
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Citi Community CapitalCiti Community Capital
PanelistSteve Guggenmos
Freddie Mac, Vice President Multifamily Research & Modeling
Steve Guggenmos leads research related to national and local marketconditions for Freddie Mac’s Multifamily business. His team develops modelsand quantitative approaches for capturing loan level risks, determining thebenefits of diversification and structural credit support for multifamily mortgagepools, and determining risk-based capital allocations. Before joining FreddieMac in 1997, Guggenmos was a financial economist for the Federal DepositInsurance Corporation and a research assistant at the Office of Federal HousingEnterprise Oversight. He holds Masters Degrees in finance from GeorgeWashington University and economics from American University and a BA ineconomics from University of Nebraska-Lincoln. He lives in Virginia with his wifeand three kids
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Citi Community CapitalCiti Community Capital
During the webinar please email questions to [email protected] or
At the end of the webinar we will have a Q&A session and follow instructions from the Operator -Press *1 for the operator to open your line. This will enter you into the queue to ask a question
Q&A
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Freddie Mac MultifamilyMarket Update
Steve GuggenmosVice President, Research & Modeling
September 12, 2017
© Freddie MacSeptember 2017 6
A Better Freddie Mac…and a better housing finance system
For families
...innovating to improve the liquidity, stability and
affordability of mortgage markets
For customers
...competing to earn their business
For taxpayers
...reducing their exposure to mortgage risks
© Freddie MacSeptember 2017 7
Multifamily Supply
Sources: Moody’s Analytics DataBuffet.com and U.S. Census Bureau
Notes: Starts and completions based on all areas of the U.S., while permits are only for areas that require a building or zoning permit. Moody’s Analytics estimated that in
2000, 95% of population was living in a permit issuing area.
0
5
10
15
20
25
30
35
40
45
50
0
100
200
300
400
500
600
700
Multifamily Permits, Starts and Completions (5+ Units) andRenter Households
MF Permits MF Starts MF Completions Renter Occupied
Un
its
(Th
ou
san
ds)
Ren
ter-o
ccu
pie
dH
ou
seh
old
s(M
illion
s)
© Freddie MacSeptember 2017 8
Housing completions are well below the long-run average;the multifamily market is helping to fill the void
Total Housing Market Supply,Single-Family and Multifamily
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
0
500
1,000
1,500
2,000
2,500
Housing Completions to Total Households (SF & MF)
Total Housing Completions (SF & MF) Completions to Households
Long-Run Average Completions to Households
© Freddie MacSeptember 2017 9
Total Housing Shortage
Overall housing supply falls short
Multifamily completions in 2017 anticipated to be at the highest levels since the late1980s
Overall housing well below the long-run average; multifamily helping to fill the housing void
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1
0.36 million
Long-run average: 1.55 million units
0.0
0.5
1.0
1.5
2.0
2.5
1968 1975 1983 1990 1998 2005 2013
Co
mp
lete
dU
nits
(mill
ion
s)
Single-family and Multifamily Completed Units
Multifamily (2+) Completions
Single-family Completions
Pre-Recession Historical Avg (1968-2007)
Source: U.S. Census Bureau; Moody's Analytics
2017 Q2 = 1.18 million
© Freddie MacSeptember 2017 10
Prices are up, with demand outpacing supply
Housing Market Price Appreciation
Sources: Real Capital Analytics (RCA), S&P Case Shiller
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Multifamily Single Family
© Freddie MacSeptember 2017 11
The current risk premium demanded to hold real estate is above average levels.
Multifamily Cap Rates and U.S. Treasuries
Sources: Moody’s REAL Commercial Property Price Index (CPPI) and Real Capital Analytics (RCA)
0.0
0.4
0.8
1.2
1.6
2.0
2.4
2.8
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10% Cap Rate Spread(left)
Treasury Rate(left)
MF Value Index(Right)
Tre
asu
ry,C
ap
Rate
&S
pre
ad
Perc
en
tM
ultifa
mily
Valu
eIn
dex
© Freddie MacSeptember 2017 12
Multifamily Mortgage Originations
Sources: Freddie Mac 10-Ks, 10-Qs, FHFA Report to Congress, and Freddie Mac's internal reports, Fannie Mae 10-Ks, 10-Qs, FHFA Report to Congress, and Fannie Mae's
Multifamily Monthly New Business Volumes, ACLI, Wells Fargo Securities LLC, Intex Solutions Inc., Mortgage Bankers Association and Freddie Mac internal research
Originations have been rising, reflecting solid marketfundamentals
$0
$50
$100
$150
$200
$250
$300
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017*
Freddie Mac Multifamily Fannie Mae Multifamily
Life Insurance Companies CMBS, Multifamily Only
Other (Banks, S&Ls, Mortgage Co., etc) Freddie 2017 Forecast
© Freddie MacSeptember 2017 13
Total multifamily market value is $3.6 trillion, while multifamily mortgage debt outstanding
is $1.2 trillion, as of 2015Q4
MDO in 2016 is 33% of market value, lower than 39% historical average.
Total Multifamily Value and MDO
Sources: Freddie Mac, NMHC, Federal Reserve Board
NMHC estimates the total market value based on property prices (using cap rates), available units, and national average rent and occupancy
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000Multifamily Market Value and Mortgage Debt Outstanding
MDO/Value Ratio (right) MDO Value
MF
Mark
et
Valu
e($
Bil
lio
ns)
MD
O/V
alu
eR
atio
© Freddie MacSeptember 2017 14
Portrays changes in
relative value of investing
over time – nationally, in
select metros
Merges three factors
» Mortgage rates
» Growth in property prices
» Growth in rental income
Presents unique insights
Updated quarterly
Apartment Investment Market Index (AIMI)Uniquely Gauges the Multifamily Environment
Find it at http://www.freddiemac.com/multifamily/aimi
© Freddie MacSeptember 2017 15
Source: U.S. Census Bureau, Current Population Survey/Housing Vacancy Survey, Freddie Mac
Rental Demand Keeps Rising
Households increasingly are becoming renters – either by necessity or by choice
60%
61%
62%
63%
64%
65%
66%
67%
68%
69%
70%
25
35
45
55
65
75
85
Owner and Renter Households andHomeownership Rate (1990 - 2Q 2017)
Owner Occupied Renter Occupied Homeownership Rate
© Freddie MacSeptember 2017 16
Source: REIS
Multifamily Fundamentals are Healthy
Multifamily market is moderating but remains healthy – vacancy rates are below long-term historical averages and effective rent growth remains positive
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%Vacancy Rate and Change in Effective Rent
Change in Effective Rents Vacancy Rate
© Freddie MacSeptember 2017 17
Rental households projected to grow throughout the next decade
Renter Households Are Growing
Number of Owners and Renters Over Time
Source: Decennial Census, Urban Institute Projections
© Freddie MacSeptember 2017 18
Income Growth is Not Keeping Pace withRising Rents
Gap Between Rent and Income Growth
Source: Freddie Mac, U.S. Census Bureau, American Community Survey
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Median Adjusted Rent Median Adjusted Income
Gro
wth
sin
ce
20
00
© Freddie MacSeptember 2017 19
55.5% 54.0% 52.5% 47.3% 43.7% 43.2%
32.0% 32.7% 33.1%36.3% 37.0% 36.8%
5.9% 6.3% 6.7% 7.5% 8.8% 9.4%
6.6% 7.0% 7.6% 8.9% 10.4% 10.5%
2010 2011 2012 2013 2014 2015
AMI: Under 50% AMI: 50%-80% AMI: 80%-100% AMI: 100%+
Very Low-income Renters Face a ShrinkingSupply of Affordable Housing
Source: Freddie Mac tabulations of American Community Survey microdata.Affordability thresholds are based on the AMI of all MSAs in the United States.
Multifamily Rental Housing Supply byAffordability Category
© Freddie MacSeptember 2017 20
Very Low-income Renters Face a ShrinkingSupply of Affordable Housing
Source: Freddie Mac tabulations of American Community Survey microdata.Affordability thresholds are based on the AMI of all MSAs in the United States.
Repeat Financing Very Low-Income Affordability Analysis, 2010 - 2016
Multifamily VLI Population Shrinking
First Financing Second Financing
Units VLI LI Median None VLI LI Median None
Total 97,061 11.2% 71.3% 13.3% 4.2% 4.3% 65.2% 21.0% 9.4%
TX 28,533 10.2% 74.0% 13.6% 2.2% 3.2% 69.0% 23.1% 4.8%
FL 13,197 1.5% 60.2% 34.1% 4.0% 1.6% 38.7% 39.6% 20.2%
GA 9,766 11.8% 75.9% 8.7% 3.6% 2.1% 77.7% 14.8% 5.4%
CO 5,128 32.4% 67.6% 0.0% 0.0% 7.5% 82.6% 9.5% 0.4%
NC 5,061 9.8% 88.2% 2.0% 0.0% 0.3% 83.9% 15.6% 0.3%
CA 4,776 2.3% 55.6% 15.6% 26.6% 2.5% 9.8% 27.1% 60.6%
AZ 4,154 34.0% 65.5% 0.7% 0.0% 21.8% 74.5% 3.3% 0.0%
NV 3,564 15.8% 67.6% 16.4% 0.3% 4.0% 75.4% 20.1% 0.5%
WA 3,262 4.0% 86.1% 1.6% 8.3% 1.1% 81.6% 11.0% 6.3%
© Freddie MacSeptember 2017 21
Citi Community CapitalCiti Community Capital
During the webinar please email questions to [email protected] or
At the end of the webinar we will have a Q&A session and follow instructions from the Operator -Press *1 for the operator to open your line. This will enter you into the queue to ask a question
Q&A
Page 22
Citi Community CapitalCiti Community Capital
Your Webinar Speakers Steve Guggenmos
Freddie [email protected]
Mark DeanCiti Community [email protected]
Citi Community CapitalCiti Community Capital
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