Fall 2011 issue of Horizons

Real Estate – continued

Market Trends Compared with the past few years, the financial market has experienced a significant turnaround. While debt availability has drastically increased, it is still limited in many respects. Since the real estate bubble burst, lending institutions have been predisposed to low-risk, high-quality assets in top-tier markets with stable supporters, leaving a large portion of the market with fewer debt options and a more challenging qualification process. Similarly, a great number of property owners looking to refinance and extend or alter mortgage terms have been faced with struggles in doing so. Per a recent survey, an estimated $77 billion of multifamily mortgages are maturing in 2011, flooding the debt market and increasing the difficulties of refinancing. As was noted in 2009, life insurance companies continue to increase their presence in the lending market as well. Life insurance company lending

rose by 150 percent in 2010, commanding about 6 percent of the industry’s outstanding mortgage debt. However, the majority of the outstanding debt remains with governmental entities, such as Fannie Mae and Freddie Mac, which continue to provide apartments with a financial advantage that has been difficult for other lending entities to match. In fact, Fannie and Freddie’s mortgage portfolios have maintained delinquencies of less than one percent, resulting in their continued involvement in the market despite discussions surrounding their potential reform. Apartment owners can also expect a strong sales market with rising property values and intense market pricing. Average pricing per unit rose as cap rates trended downward in 2010, although both measures are still below levels reached during the market’s peak.

Raise Your Expectations

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