MF Experts: Long Term Looks Great

The good news is that multifamily assets will be a great investment over the long haul. "Long term, the multifamily sector is absolutely the brightest sector in the real estate market," said Apartment Realty Advisors principal Brian O'Boyle. The not-so-good-news is that the short term still needs to be gotten through.

"The challenge will be how to navigate 2009 and 2010," commented Fannie Mae Multifamily director Wil Steplight. "It'll be bad for the next 12 to 18 months. From 2011, and out, we're in for some very good times."

The 2009 market consists of rising cap rates, skittish investors, cynical sellers and overburdened special receivers who are working hard to stem foreclosures, especially among class C product. Also having an impact in Texas is a glut of inventory coming into the market, leading to increased vacancy and concessions. The panelists agreed that when it comes to ranking the four cities in terms of vacancy, inventory and investments, the Dallas Fort-Worth area would be number one, with Austin at the bottom.

Austin is at the bottom, points out Apartment Group president Jeff Price, because of 9,000 units in the pipeline, continued overbuilding on the north side, vacancy in the double digits and a great transportation system. "Students know they can get to (University of Texas) campus from anywhere," he remarked. "So they can live anywhere."

Despite uncertainty, the panelists agreed some things are starting to happen, though slowly. O'Boyle said during the past seven days, he put seven deals under contract, with three of those deals consisting of class A product. Price said he's also seeing some traction coming to the market. "Sellers want to sell," he said. "They have to be made believers."

In the meantime, on the refinance side, Fannie Mae and Freddie Mac are starting to be more proactive, and are reaching out to owners before the loans mature. Furthermore, in an acquisition scenario, depending on product and owner, Fannie Mae is definitely amenable to talking, Steplight said. Even in the more difficult markets, such as Phoenix and Las Vegas, "depending on the condition of the market and experience of the owner in that market, we'll take a look at the merits of the deal," Steplight said.