Federal Home Loan Mortgage Corp (OTCBB:FMCC) said that its division serving apartment owners is growing as loan borrowers take advantage of looser lending norms. The company underwrote nearly $21 billion of debt on apartment division in 2H2014, nearly triple of what it did in the first six months of FY2014.The growth indicate that McLean surpassed Fannie Mae in FY2014 to become the biggest provider of apartment segment financing. The change came only after agency adopted new ways of operations.
The Agency that looks after operation of Federal Home is changing policies so that it can reduce the number of government-controlled finance firms. The changes will permit Freddie Mac venture into segment of multifamily lending. It is one the most ignored sectors in the industry. The new measures have resulted in strong demand for apartment units. Now, it has converted into a lucrative segment of commercial real estate. The value of the division rose to an extent of probable over inflation.
As per Sam Chandan of Chandan Economics, there is a changing trend in rents segment, as they have been rising at a faster rate than wages. The outlook for rental growth is given more importance than it was given few years ago. The cities like New York and San Francisco, with multifamily buildings, have posted biggest gains in the recovery period. The prices of multifamily buildings were nearly 40% higher than highest levels made in November 2007. The real test of these values will come when the interest rates will be increased later in year.
Room for growth
After an impressive growth, the prices in apartment division can see a correction in near-term. David Brickman who looks after Multifamily Operations at Federal Home Loan said that still there is a lot more space for growth in apartment division. The focus is not there on Class B properties, and thus, vacancies remain low.