Multifamily homes

At a recent webinar hosted by IPA, a division of Marcus & Millichap, executives from influential multifamily businesses and organizations spoke about the current COVID-19 pandemic’s effect on the industry. Most agreed that the current challenges facing commercial real estate are first and foremost a health crisis, and after that a financial crisis. While these business and organizations have little influence over the COVID-19 pandemic, they are working to analyze the current situation.

Here are some key takeaways from the webinar:

  • Health comes first, economy will follow. The path to the recovery of the economic fallout, according to Hessam Nadji, President, Marcus & Millichap, begins with the resolution of the healthcare crisis, and whether society is doing enough on the healthcare front. Before the CRE industry, especially the multifamily sector, can truly understand and embrace the changes in multifamily lending and activity, it will need to process what has taken place.
  • Banks and financial institutions are better equipped than in 2008/2009. When drawing any comparisons to the 2008 crisis, the positive news is that the financial systems are much better suited today to handle this volatility. Banks have been disciplined in lending (including multifamily lending and reserves are strong. Additionally, the initial Federal economic response in 2020 has been swift, occurring in less than 30 days. A similar response to the Great Recession took nearly 14 months to materialize.
  • Challenging times require agility and communications. Bob Hart, President and CEO, TruAmerica, says that owners with large portfolios who change course in response to this pandemic require agility because it’s like turning a battleship. His organization has become even more focused on weaving together strategies on rent collection, apartment rents, and renter education. Hart noted that by April 3 TruAmerica had collected 62% of rent due for the month. “We may not be giving enough credit to renters for paying,” he added.
  • Opportunity may be knocking on the other side. Many participants acknowledged there is a road ahead of us, but there also may be opportunities on the other side. Alan George, Chief Investment Officer of Equity Residential, said he’s optimistic about an eventual recovery, but is wondering if the current cycle will be V shaped, with a quick bounce, U shaped with a slower recovery, or some other variation.
  • Current situation won’t cure what has already ailed multifamily. Regardless the length of this downturn, the multifamily sector will emerge with familiar issues. Doug Bibby, President of the National Multifamily Housing Council, said the country already had an affordable housing crisis. “This will only make the problem tougher and create a longer runway to solve the problem,” he added.
  • Demand for rentals likely to increase. If underwriting for homeownership holds to similar guidelines as before, it will be harder to put together the equity needed for homeownership. According to Bibby, many people whose jobs have been affected—either through layoffs, temporary furloughs, or cuts in salaries—have had savings and retirement plans melt away. This will extend the need and market for rental housing.
  • Webinar participants also addressed how Fannie Mae and Freddie Mac have issued COVID-19 related forbearance rules and guidelines, which are being evaluated and modified to conform with the $2.2 trillion stimulus package. They are also offering relief and education to their tenants, including focusing on safety and education; eliminating evictions; and tabling rental rate increases, among other things.

    Overall, there was a real sense that multifamily property owners, lenders, and organizations supporting the industry are working diligently to ensure the best possible outcomes in the post COVID-19 world.

    At Lightbox, we are here for you and are adjusting to this situation alongside you and your business. Talk to our team and learn more about our resources and how we can support your business.

     

    Category Multifamily