Fitch expects the positive operating performance of the multifamily sector to continue during the next 12 months and to continue contributing significantly to the performance of real estate investment trusts (REITs) that invest in those properties. However, we increasingly see risks forming in the sector's acquisition underwriting in addition to its growing sensitivity to an increase in interest rates, future supply, changes to the GSEs, and most importantly, improvements in the single-family residential market.
Recent trends in underwriting suggest risks for the sector beyond the 12-month range. Some borrowers (predominantly unrated private owners and operators) and lenders have resumed pro forma underwriting that was popular during the heyday of the bull market. This type of underwriting depends on low interest rates at refinancing to maintain capital values. Rising interest rates or a failure to achieve underwriting assumptions due to pressures related to rental affordability could create the difficult refinancing conditions other property sectors encountered in 2008-2011.
Read more...Strong Multifamily Market Triggers Risk Trends - Multifamily News Headlines – Breaking News, Stories, Top Headlines :: MultifamilyBiz.com
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