News
Multifamily finance sees improvements in investment conditions
Multifamily investment Conditions improved in the first three months of the year, reversing the direction of the market decline in the second half of 2023, according to Freddie Mac.
The government-sponsored enterprise’s Multifamily Apartment Investment Market Index accelerated 8.7% quarter over quarter to a reading of 112.5, improving from 103.5, which reflected a 4% decline in the previous report. The index also increased 8.1% annually, surpassing the 3.9% gain in the fourth quarter.
Freddie Mac’s AIMI measures multifamily investment conditions based on mortgage rates, rental yields and home price growth. GSE researchers found improvements in all 25 markets monitored across the country.
“A decline in home prices and interest rates contributed to AIMI’s strong start to the first quarter of the year,” said Sara Hoffmann, director of multifamily research at Freddie Mac.
“The increase in the overall index this quarter is especially notable and was aided by the largest quarterly decline in mortgage rates since 2010.”
Multifamily investors saw rates fall from 6.5% to 5.9% during the quarter as signs emerged of moderating economic growth and slowing inflation in late 2023. By comparison, volatility throughout much of the year The past ended up pushing interest rates up nearly 70 basis points and led to a drop in index readings in the last three quarters of 2023. In the fourth quarter, the AIMI fell in all 25 markets measured.
The latest index report, however, does not capture the rapid reacceleration of interest rates that occurred from April 2024 and has since moderated.
The report of more favorable financing conditions comes as leading investment entity Blackstone Mortgage Trust announced a deal this week with M&T Realty Capital Corp., opening access to Freddie Mac and Fannie Mae multifamily financing through of the originating unit of the latter company.
The new partnership will establish a dedicated team to assist Blackstone borrowers in multifamily property transactions involving GSE products.
“Partnering with M&T increases the range of capital solutions we can offer our borrowers,” said Katie Keenan, CEO of Blackstone Mortgage Trust. “We are excited to gain access to the agency multifamily lending market through M&T’s established business and team.”
The new deal also reflects M&T’s “commercial real estate strategy to expand our client base and grow our national multifamily lending platform,” said company CEO Michael Edelman. The company is a subsidiary from M&T Bank, based in Buffalo, New Yorkwhile Blackstone Mortgage Trust is owned by the alternative asset management company of the same name.
Apartment prices fell in every city tracked by Freddie Mac in the first quarter. Chicago recorded the smallest drop in the three months, at 0.4%, while Denver recorded the largest drop, at 3.8%. Among the cities in between were New York, Los Angeles and Houston, with declines of 0.8%, 1.4% and 1.8%, respectively.