Fannie, Freddie expected to remain dominant Multifamily lenders over next 2-5 years. Video

… and other apartment market predictions for 2012 from industry leaders. See video here: Fannie, Freddie to remain dominant Multifamily lenders next 2-5 years

Feds to turn foreclosures into rentals, Good for Multifamily?

(CNNMoney) — Federal officials hope to launch a pilot program in early 2012 to convert government-owned foreclosures into rental properties.

The program, which was cited by Federal Reserve Chairman Ben Bernanke last week as one way to address the housing crisis, would sell foreclosed homes now owned by Fannie Mae and Freddie Mac to investors in bulk. The properties would then be converted into rentals.

http://cnnmon.ie/wCfbxU

“… every MERS mortgage is defective” a NY State Supreme Court judge.

If you have taken out a mortgage on (or refinanced) your home (or business property)  in the last 10 years or so chances are the title of your property is clouded so badly that no one can legally foreclose on your loan. This is the result of an illegal, little known operation that was specifically setup to expedite the rapid securitization and trading of mortgage securities. Further it was explicitly devised to circumvent the centuries old democratic process of recording property ownership and mortgages against those properties at county clerks offices across the country.

See the quotes below, read Barry Ritholtz’ take on it here: http://bit.ly/yGMaGc or read the whole article here: http://harpers.org/archive/2012/01/0083752 Not a subscriber? $15.00/year through Amazon: http://amzn.to/zQDafi Continue reading “… every MERS mortgage is defective” a NY State Supreme Court judge.

Only 38k Multifamily units added in 2011; demand = 300k+. Grubb & Ellis 2012 Forecast

New development is picking up but is restrained by lack of lender appetite.

Senior housing to see vacancy decline below 10% also.

Via Grubb & Ellis’ 2012 Real Estate Forecast available here: http://bit.ly/xfBnmd

Thanks to Jason Brumm of G&E San Antonio

Extra 100-150bp of risk premium (good!) for Multifamily says Freddie’s Brickman.

AFT: When you look at some of the cap rates on recent transactions, do you feel like the multifamily industry is getting a little overheated in some markets?
Brickman:
I do not. I think it is perfectly rational where cap rates are now. The cap rates are driven by financing costs, and what you’re really saying is, can cap rates go up? Of course they can, and if [interest] rates go up significantly, cap rates would likely go up, but it’s not one for one. What you have to look at is [that] the spread of cap rates to Treasuries is actually quite wide.

AFT: It’s probably more than 400 bps now, on average.
Brickman:
Exactly, and historically it has not been anywhere near that wide—it’s been more like 250, 300. And so you’ve got a very healthy risk premium to real estate right now, and you’ve got strong growth forecasts. There are very positive influences lining up behind demand and a relatively anemic level of supply. So, I think you can legitimately sign up for pretty healthy rent growth. And that [in] itself justifies a low cap rate even independent of the interest rate.

See the whole interview at: http://bit.ly/xp9VM7

Vince Farrell on Baboons and Congress- too funny

We have a herd of cattle. A flock of chickens. A school of fish, be they large or small. A gaggle of geese. A pride of majestic lions. Believe it or not, a murder of crows. An exaltation of doves. Wisely, a parliament of owls.

Then we are left with baboons. Baboons are, by most estimates of those that care about baboons, the loudest, most dangerous, most obnoxious, most viciously aggressive, and least intelligent of all primates. A collection of such horrible things is called, and you can’t make this stuff up, a Congress!!

Vince is an old hand who’s seen a few market cycles and his hard earned wisdom is well worth listening to in these times. Send him an email and ask to get on his list: vfarrell@ticonsec.com Or catch him on CNBC, Bloomberg, MSNBC, etc.

Renters want to be green, Multifamily developers respond.

Composting food waste is an eco-conscious activity typically associated with single-family home neighborhoods rather than apartment complexes. But composting will be easy for residents of the green-centric apartment complex being built in Minneapolis, which will open later this year.See more at http://bit.ly/wJjcGI

Converting Cap Rates to Earnings Multiples

After a recent speaking engagement I was asked about how and why I use the earnings multiple concept when evaluating apartment investments. It was a great question and so I’m sharing my answer here in this blog post.

As a value investor two of the fundamental questions I always ask is what am I buying and how much do I have to pay for it. With an apartment investment (or really any investment) I am buying current income and the potential for appreciation so the second question comes down to “How many years of earnings do I have to pay for these returns?” The question can be answered by converting the cap rate to an earnings multiple. The Cap Rate is the return in current income on an apartment investment you could expect if you paid all cash. To convert a Cap Rate into a Earnings Multiple use the formula: Continue reading Converting Cap Rates to Earnings Multiples