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Fannie Mae: Property asset class seen as least volatile

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A strong appetite among investors to put their money to work in commercial and multifamily mortgages increased the level of mortgage debt outstanding in the second quarter of 2013, according to the Mortgage Bankers Association.

The level of commercial/multifamily mortgage debt outstanding increased by $24.5 billion in the second quarter, as three of the four major investor groups increased their holdings.

The $2.45 trillion in outstanding commercial/multifamily mortgage debt was $24.5 billion higher than the first quarter of 2013.

For instance, multifamily mortgage debt outstanding rose to $875 billion, increasing 1.3% from the previous quarter.

"In the second quarter alone, banks increased their holdings of commercial and multifamily mortgages by $16 billion; Fannie Mae, Freddie Mac and FHA increased their multifamily holdings and guarantees by $5.6 billion and life insurance companies increased their commercial and multifamily holdings by $4.0 billion," explained MBA vice president of commercial real estate research Jamie Woodwell.

Commercial banks continue to hold the biggest share of commercial/multifamily mortgage, accounting for $855 billion, or 35% of the total.

Looking solely at multifamily mortgages, agency and government-sponsored enterprise portfolio and mortgage-backed securities hold the largest share, representing 44% of the total multifamily debt outstanding, or $388 billion.

Multifamily mortgages have been an attractive product since the Great Recession because they have posted little net change, providing consistency for investors, explained Fannie Mae director of multifamily economics and market research Kim Betancourt.

"Multifamily is the least volatile and investors realize it’s a viable property sector that has been performing over the years," Betancourt said.

She added, "Multifamily has been steady across the broad after a little dip in late 2009 through early 2010, and that’s because the sector provides people with affordable ways to live."

Additionally, banks and thrifts, accounting for 28% of the total, or $244 billion, follow them.

In the second quarter, banks and thrifts posted the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt, up $16.4 billion, or 2%.

In contrast, the household sector saw the largest decrease, dropping to $1.9 billion, or 43%.

In percentage terms, real estate investment trusts recorded the largest increase in holdings of multifamily mortgages, representing 31%. 

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