Commercial Real Estate is not Folding, Just Slowing Down

While the housing market continues to decline in a lot of the nation, the multifamily sector is still growing. Let's face it, people need a place to live. Apartments, duplex, triplexes, fourplexes, etc are in great demand, especially ones that are cash flowing and have a good upside. Or even ones that have gone into foreclosure due to any number of reasons and are now being bought at prices will below market value.

There is money out there for commercial aquistions, but you can rest assured the properties are vetted and number are verified really work before they are purchased. The big boys on wall street are buying defaulted mortgage notes for both single family residences (SFR) and commercial property.

Land banking is not happening, except in very hot growth area's and only in the path of progress. Developer after developer of SFR's are unloading some, if not all of their land holding to free up cash and stop the bleeding. Some few builders/developers are converting to apartments, which are marketable the majority of the time.

While Fannie Mae and Freddie Mac are in the SFR mortgage business, it is interesting to see them get on the multi-family housing mortgage train. While their investments tend to be on the smaller order of multi-units, they are building their mortgage portfolio.

The Federal National Mortgage Association (Fannie Mae) and the Federal Home Mortgage Corp. (Freddie Mac) hold or guarantee more than $6 trillion in mortgages - nearly ½ the nations total. Most of that is for single-family residences, but the two agencies and the Government National Mortgage Association (Ginnie Mae) also held $157 billion in multifamily debt in their portfolios at the end of the first quarter of 2008 and nearly $143 billion in mortgage-backed securities.

These agencies hold more than a third of the nation’s multifamily mortgage debt. Even though experts believe Fannie and Freddie are too large and too important to fail, some investors worry about their continued role in multifamily mortgage financing.

But in a article I read yesterday, a Fannie Mae representative came out touting their current role in supporting the apartment industry. In fact, the volume of deals done the first half of 2008 was larger than it was in the first half or 2007. The spokesperson reiterated, “We plan to continue investing and growing the multifamily mortgage market.”

The article was extremely optimistic about the assurances from Fannie Mae and Freddie Mac of their financial health and their ability to continue sponsoring loans. With the regulators and the Fed’s willingness to provide additional liquidity, the risks seem minimal.

Jamie Woodwell, vice president of commercial/multifamily research at the Washington-based Mortgage Bankers Association had this to say: “From my perspective on commercial real estate and commercial real estate finance, the commercial and multifamily mortgages have been performing extremely well. They’ve been strong assets for those investors in the mortgages. So I think there are a lot of reasons for those investors to continue to look to commercial real estate finance as a place to put their money.”

This is good news for us. Multi-family properties will continue to do well AND with the commitment of Freddie Mac and Fannie Mae to continue to support multifamily mortgages, this is one segment of Commercial Real Estate that is remaining strong.

If you are interested in getting into commercial real estate at a scouting level, check out http://www.nacreps.org

The National Association of Commercial Real Estate Property Scouts stays on top the shifts in the commercial real estate market and keeps their scouts looking for the next deal.