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Special Reports
Commercial Lending
Eyeing Multifamily Sector's Outlook
New condo sales are weaker than condo resales.
By Poonkulali Thangavelu
Inventory in the residential housing market will not resume growth until the end
of 2007, after two years of decline, and tightened availability of credit could even delay the growth to the first
quarter of 2008, according to Jamie Woodwell, senior director, commercial/multifamily research, with the Mortgage
Bankers Association.
Speaking at the MBA's Commercial Real Estate/Multifamily Finance Asset Administration
Conference here in a session on the impact of the housing slowdown on the multifamily market, Mr. Woodwell said
that the MBA expects economic growth to pick up at the end of 2007 and interest rates to remain at about current
levels through 2008.
The MBA forecast also calls for home prices to decline 1% in 2007 and existing
home sales to decline 6%, as well as decline in sales of new homes.
Providing some background on the factors behind the recent run-up in home prices,
Mr. Woodwell noted that a historically low interest rate environment (that followed the recent 2001 recession and
the 9/11 attacks) led to an increase in the homeownership rate from 64% in 1990 to about 68% now. There was a move
towards homeownership and away from renting.
That "five year story" of strong price appreciation, particularly on
the coasts, has slowed down in the last few quarters.
Ron Witten, president, Witten Advisors, said that he expects solid job growth
in 2008 and 2009, after a slowdown in 2007, which should be a demand driver for multifamily rentals.
On the condominium front, sales of new units are "much weaker" than
sales of existing condo units, according to him. Also, a record number of single-family homes for sale, as well
as single-family for rent homes, are now vacant.
A pullback by single-family builders, with starts now down 40%, is a first step
towards recovery. On the condo side, Mr. Witten sees improvement only in 2008. He expects soft demand to lag net
supply in the multifamily market until the middle of 2008.
Mr. Witten expects that multifamily occupancies will edge lower, and rent growth
will be slower, in 2007. These determinants of multifamily performance are expected to regain strength in 2008
and 2009.
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