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Trends Watch: Outlook for Agency Lending to Multifamily Housing
- Published
- Aug 24, 2023
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EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.
This week, Elana talks with Vince Mejia, Senior Vice President of Agency Lending, Greystone.
What is your outlook for agency lending to multifamily housing?
As the year progresses, we see agency loans regaining market share. There is an anticipation that financing will shift away from smaller banks toward agency loans such as Fannie Mae and Freddie Mac. The banking disruption we saw at the start of this year resulted in the pullback in lending from small and regional banks, but we don’t see this as cause for significant concern for liquidity in the multifamily sector going forward. Typically, agency loans represent about 58% of total multifamily loan originations. That share dropped to about 40% to 45% over the past two years, but the agencies’ share of loans has already risen to 55%, up 10% year-to-date for 2023. Greystone has seen a significant uptick in agency loan requests over the past few months, the highest level of activity since 2021.
Where do you see the greatest opportunities and why?
Amid the volatility in our domestic and global economy over the past three years, the multifamily sector has offered the most compelling risk-reward scenario. Shelter is a need and multifamily tends to be a better performer through economic volatility. Multifamily has performed well so far in 2023, with stable rents and occupancy rates. Rents continue to grow at more normal levels than in the past couple of years, performing closer to pre-pandemic levels. We believe that there continues to be great opportunity in multifamily. Application requests for a mix of acquisitions and refinances are up 2x compared to the fourth quarter of 2022, and April’s volume was up 30% year-over-year. Year-to-date applications went above $8 billion in April. There are several drivers of sales activity: loan assumptions (e.g., low-cost debt) that may be attractive to investors; the ability to realize returns on long held assets; and investors looking to crystallize liquidity.
What are the greatest challenges you face and why?
Despite the strong demand and mitigating factors that reduce the threat of oversupply, the multifamily sector isn’t immune to the same risks as other property types. Some of the greatest challenges include rising interest rates, inflation and an economic recession. Multifamily is recession-resistant, but it isn’t recession-proof. If a recession is deep enough to impact demand, particularly with supply coming on, it could hurt the multifamily market.
What keeps you up at night?
My kids! Three under the age of 8 and a newborn on the way – sleep is a scarce commodity in our house these days.
The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.
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