New from MPF Research: Unsteady Freddie (and Fannie), Multifamily Permit Plateau

Posted on November 1, 2016

The multifamily industry is constantly evolving, and it’s important to keep up-to-date with apartment market intelligence and trends. We’ve brought you the latest updates from MPF Research to help you stay competitive.

Here’s our take on two major updates released by MPF:

The future of Fannie and Freddie

In 2008, after taking a beating during the housing crisis, Fannie Mae and Freddie Mac were placed under the conservatorship of the Federal Housing Financing Corporation to ensure solvency for the for-sale market among other things.

In the years since, both agencies have lent important support to the growing multifamily segment. But there’s been an ongoing conversation about the future of Fannie and Freddie that revolves mostly around reducing taxpayer risk, and talk of major reform or even dissolution on both sides of the aisle in Washington.

The thrust of most of the discussion has been that it’s time for the private sector to pick up a lot more of the risk of mortgages. The Bipartisan Policy Center nonprofit think tank advised in 2013 that “the private sector must play a far greater role in bearing credit risk,” with GSE portfolios shrunk and their pricing structure moved “closer to what one might find if private capital were at risk.”

This year, the Urban Institute partnered with Moody’s Analytics to propose a government corporation called the National Mortgage Reinsurance Corporation (NMRC) to transfer more risk to the private sector. Within the housing finance system, the NMRC would be responsible for bearing catastrophic credit risk, mortgage securitization and furthering the public policy mission.

But despite all the talk, the issues around Fannie and Freddie are complex, with an array of stakeholders weighing in. So don’t expect any significant action in the near term.

For a deeper look at the status of Fannie and Freddie, check out the full update from MPF Research.

Multifamily permits reach high plateau


MPF Research also reported this month that multifamily permit activity appears to have reached a plateau at levels well above historical norms, suggesting that apartment construction could ease over the coming year.

In August 2016, a total of 32,500 multifamily units were approved for construction by local governments nationwide, according to the U.S Census Bureau. This monthly figure was up 2.8% from July 2016, but down 3.6% from August 2015, indicating activity may be finally slowing.

At the end of 3Q 2016, more than 555,000 apartment units were under construction in the top 100 U.S. metros. That’s a feverish construction pace roughly 90% higher than the 20-year average.

For a more in-depth look at permit activity, read the full update from MPF Research.