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Multifamily Sentiment Remains Strong For The Foreseeable Future

Hilary Provinse of Berkadia

Hilary Provinse, executive vice president and head of mortgage banking at Berkadia, highlights the trends, strategies and activity attendees should have on their radar ahead of MBA CREF 2019 in February.

Coming off a strong and surprisingly consistent year in 2018, we’re feeling good about 2019. The year is off to an interesting start to say the least, and we’re keeping our eye on several factors. These include Treasury rates, the regulatory environment, tariffs and development costs that will impact our business. Even keeping these in mind, however, there are positive factors that point to the potential for continued economic strength and activity in the multifamily market.

Fundamentals of the Economy Remain Very Strong

Unemployment continues to fall, and jobless claims remain extraordinarily low. Despite the recent decrease in consumer confidence — volatile in its own right — it remains near the highest levels since 9/11. GDP growth also remains strong with consumption, investment and government outlays all supportive. 

Multifamily Demand-Supply Dynamics Remain Solid

The percent of population living in multifamily units has experienced a slow, but consistent, increase since the 2008 financial crisis. Loan maturities are expected to increase in 2019 versus 2018 across several sources. Maturities are inevitable events that require some form of activity, be it sale or refinance. The rise in mortgage rates at the end of last year slowed activity in the for-sale, single-family market. This hesitancy provided an unexpected boost to the rental market. We may very well see a similar pattern this year.

In our recent Powerhouse Poll — an internal sentiment survey of our mortgage bankers and investment sales brokers — 77 percent of respondents anticipate available capital to increase or remain the same compared to last year. We expect that the multifamily market will remain strong. About 77 percent of our respondents believe multifamily deal size will either grow or at least remain the same as 2018. Per the MBA’s recent survey, three quarters of borrowers expressed strong or very strong appetites for loans.

The Stock Market is Not an Accurate Barometer of Economic Activity

Warren Buffett’s mentor, Benjamin Graham, has been quoted as saying, “Over the short-term, the market is a voting machine [popularity contest], but in the long-term, it is a weighing machine [true value].” There’s little correlation between short-term returns in the stock market and our world. Stocks have taken several swoons since the recession, while multifamily values have continued to rise. 

Ultimately, there will continue to be great opportunities in our space, regardless of how the market performs. It comes down to leveraging the right insight, experience, resources and, above all, remaining relentlessly focused on long-term aspirations. For Berkadia, that means working in lockstep with our clients to provide advice, technology and services that will enable them to achieve their goals. We always see the greatest opportunity in striving to be better and more capable advisors to our clients.

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