freddie mac multifamily market update · 2017-09-18 · sources: freddie mac 10-ks, 10-qs, fhfa...

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]


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


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

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


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)


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


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


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


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


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


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


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


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


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


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


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


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


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%


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


Your Webinar Speakers Steve Guggenmos

Freddie [email protected]

Mark DeanCiti Community [email protected]


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freddie mac multifamily market update · 2017-09-18 · sources: freddie mac 10-ks, 10-qs, fhfa...

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