This interview with a representative of onw of the largest mortgage bankers in the U.S. and published last week updates us on the status of the multifamily mortgage market.

Q&A with Avi Weinstock: Fannie, Freddie Spreads Have Widened But Pricing Is Still Competitive

Published: August 21, 2008

Avi Weinstock is a partner and executive vice president at New York-based mortgage brokerage
firm, Meridian Capital Group. As head of Meridian’s multifamily property division, Weinstock and his team have closed over 2,000 transactions annually since 2004, generating a deal volume in excess of $10 billion per year in closed loans. Weinstock talks to MHN Online News Editor, Anuradha Kher about the comeback of conduits, the direction in which capital is headed and his advice for borrowers.

MHN: What kinds of deals are getting done in today’s market?

Weinstock: A variety of multifamily deals are getting accomplished in today’s market. What has changed is the amount of leverage being offered and that has much to do with the way that a lender is prepared to view projections and lend against them. But for any given property, you still have a host of lenders competing to provide financing.

MHN: Has the loss of confidence in Fannie and Freddie widened the spreads on the companies’ loans?

Weinstock: Spreads have clearly widened in response to everything we’re reading about every day in the news. But pricing is still extremely competitive.

MHN: How much has Meridian closed through the end of July this year?

Weinstock: Meridian has managed to close more than 500 transactions and $2.1 billion in agency multifamily loans through the end of July this year.

MHN: What do you think will happen with spreads?

Weinstock: I am wise enough to avoid making any concrete predictions, but I certainly hope they will come down a bit or at least stabilize.

MHN: Where are we in terms of the financial crisis? Recovering, still worse to come…?

Weinstock: I believe we only have just begun to recognize how many mistakes were made over the past 10 years and the devastating effects that those decisions are now having on us. Just the same, there are still so many great opportunities that lenders want to lend on. There is no shortage of good sound real estate and responsible owners–and all of the banks bidding for that business. There will be some tough times ahead, but the stabilized multifamily market should be less affected than other sectors.

MHN: Will conduits come back and when?

Weinstock: They have already started to “come back�. But if “coming back� entails going back to 90 percent financing with 10-year interest-only terms with debt servicing in year five, then we may be years away from that sort of comeback. For the right product, of course, conduit lenders are still open for business.

MHN: What direction is the availability of capital headed?

Weinstock: The availability will be there, it just may not be with the same players who have been active over the past 36 months. The next 18-24 months will definitely be interesting to track.

MHN: What advice do you have for borrowers?

Weinstock: There are a lot of unknowns in this business. Where are real estate values going? Where are energy prices headed? How will the elections affect your real estate income? If borrowers can secure financing amid this turbulent market, they should take advantage of a good opportunity.

This article should be very encouraging to women interested in the multi-family industry since it points out the progress being made by women in high ranking jobs in theis industry.

Publication date: August 1, 2008

By Shabnam Mogharabi, Editor, Multifamily Executive Magazine

A few weeks ago, the staff of MULTIFAMILY EXECUTIVE and a panel of executives from the leading companies in the multifamily industry judged MFE’s annual awards competition. Among the categories was Executive of the Year—a recognition that, in past years, has been bestowed on respected chief officers such as Dave Woodward of Laramar Communities, Ron Ratner of Forest City Residential, and Tom Bozzuto of The Bozzuto Group.

This year’s Executive of the Year is no exception. She is a champion for multifamily housing and has a compelling story to tell. She is also the first female Executive of the Year MFE has named in more than a decade of bestowing the award.

The recognition of a woman made me think about the growing number of female executives in the multifamily industry. Women have long filled roles as leasing agents and site managers, even as regional and senior VPs. But today, it seems that more and more women are CEOs of national real estate companies or managing directors of multibillion-dollar investment funds.

I recently spoke with Dr. Gail Ayers, CEO of the CREW Network, a national organization of 8,000 or so members that provides career services and networking opportunities to women working in commercial real estate. Dr. Ayers affirms that interest in real estate grows every year among women. At CREW, membership grows by 10 percent to 12 percent per year, she says. And the vast majority of these members have at least five years of experience in the industry. “I am very excited about the future of CREW and the future of the real estate industry,� Dr. Ayers says. “I think it looks good for women.�

Despite such obvious advancements, women continue to fall on a lower rung than men on the corporate ladder. In fact, a 2005 study by CREW found that, when comparing men and women with more than 20 years of experience, only 23 percent of women held the title of president, chief executive, or chief financial officer. That’s compared to 44 percent of men.

What does all of this tell me? Women are closing the gap on inequality in the multifamily workplace—as they are in all facets of life. And that is a good thing. Psychologists have found that women in positions of leadership tend to be more cooperative, positive, and encouraging than their male counterparts. That’s not to say men don’t exhibit those qualities. The world’s greatest leaders have historically been men—but today, women are being afforded the opportunity to equal those achievements.

Interestingly enough, I recently learned that many successful women also happen to be single. And these single women have become a powerful segment of the population, with widespread influence and solid spending power. More and more of these women are making their mark on the housing industry, buying up homes at higher rates than ever before. In fact, a 2007 study released by the National Association of Realtors reported that single women in the 25 to 34 age bracket bought 1.76 million homes from July 2005 to June 2006, accounting for 22 percent of the market. That’s up from 14 percent a decade ago.

Meanwhile, the number of single men buying homes stayed flat at 9 percent during the same period. Some researchers attribute this uptick to a variety of factors, including an increase in the number of women with college educations and a growing desire to achieve financial independence earlier in life. I’m not sure that those are the only reasons—I wonder whether, perhaps, society has also changed its view of the fairer sex, embracing women on equal footing with men and thereby empowering them to make such financial decisions alone. That’s why, in the next few months, MFE will be investigating the needs and challenges of this emerging demographic. What we find out will be useful information to anyone marketing apartments and condos to women.

By the way, if you’re interested in finding out who the 2008 Executive of the Year honoree is … well, you’ll have to wait until we announce the award at the 2008 Multifamily Executive Conference in October. But trust me. You’ll want to be there. Her story will knock your socks off—and show you just how influential a leader a woman can be.

This article describes the current activity in the multi-family loan market and the important role that Fannie Mae and Freddie Mac are playing in offsetting the decline in funds available from other traditional lenders for multi-family properties.

MBA report shows drop in lending, while industry frets over Fannie, Freddie.

Source: MULTIFAMILY EXECUTIVE MAGAZINE

Publication date: August 1, 2008

By Les Shaver

In the first quarter of 2008, there were 27 percent fewer multifamily originations than in the same period a year earlier. That drop-off is noteworthy considering that the fourth quarter of 2007 was “extremely strong,� says Jamie Woodwell, vice president of commercial/multifamily research for the Washington, D.C.-based Mortgage Bankers Association.

For the most part, the first quarter of 2008 was buoyed by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Just look at the office sector, which didn’t have GSE support and, when combined with multifamily, fell 53 percent from the first quarter of 2007 to the first quarter of 2008. The latest MBA numbers only reinforce the GSEs’ influence on the multifamily market. Between the end of 2007 and March 2008, the amount of outstanding multifamily debt went from $837 billion to $865 billion. Fannie Mae, Freddie Mac, and Ginny Mae were responsible for 73 percent of that $18.5 billion increase.

“The GSEs have really been providing a lot of capital to the market,� Woodwell says. “While most of the others declined in originations, Fannie and Freddie saw a big increase in originations in these two periods.�

Unfortunately, now the question on everyone’s mind is how the industry will fare in light of recent turmoil at Fannie Mae and Freddie Mac. In July, the mortgage giants’ stock prices fell sharply on the heels of reports speculating whether they needed to raise more capital to overcome writedowns. By July 7, shares of Fannie Mae fell 62 percent, while shares of Freddie Mac tumbled 62 percent—pushing both to 13-year lows. On the one hand, the Federal Reserve is making its short-term loan programs available to the two companies, and the Bush administration is pushing Congress to pass a plan that would allow the Treasury Department to put billions of dollars into the two companies through investments and loans.

In the meantime, industry observers are wary. In his travels around the country, Doug Bibby, president of the National Multi Housing Council, sees trepidation among NMHC’s apartment owner and manager members. “They’re just very nervous that this lifeline will go away,â€? he says.

Bibby, who thinks market speculators and the ensuing media circus created much of the trouble, can’t imagine the multifamily markets without the two GSEs. “If anything happens to these two, it will cripple the housing market,â€? he says.

Not all signs are cause for concern, however. “Fannie and Freddie raise the funds necessary to purchase multifamily loans by selling debt,� says Jerry Howard, CEO of the National Association of Home Builders. “That market is working well, as evidenced by the Freddie Mac sale of $3 billion on Monday [July 14].�

Despite the problems, Woodwell thinks Fannie and Freddie can continue to support the multifamily industry. “Just last week, Fannie Mae reiterated their strong appetite for multifamily mortgages,â€? he says. “The recent market disruptions don’t appear to have diminished either Fannie Mae’s or Freddie Mac’s desire for multifamily mortgages going forward.â€?

David Fitch, for one, doesn’t see things changing right now. “It is kind of business as usual,â€? says the CEO of Gables Residential, an apartment owner based in Atlanta. “What we have heard is that both Freddie and Fannie are still actively quoting new multifamily loans, still rate locking, issuing new commitments, and buying mortgage loans. I’ve got to believe that there will be some moderation from the ‘F’s,’ but it isn’t a shut down at this point.â€?

But will it continue? If other sources of liquidity, such as CMBS, come back, Fannie and Freddie may lose some market share. Eventually, though, Woodwell thinks the extremely low delinquency rates in multifamily will bring other servicers back. For now, they’re cautious. “Some of what the lenders see is an ability to make sure they’re getting the underwriting right,â€? he says.

Can you invest in real estate with no money? The answer is No. Contrary to what you may have heard, when investing in real estate you have to have money or at least access to money. There is no such thing as buying real estate with no money. The good news is it doesn’t have to be your own money and this is why real estate is such an attractive business and investment. So as an investor, you need to make sure you have access to good sources of capital regardless if you are a new investor or a seasoned investor. Having sources of money will also make working with real estate agents much easier and will give them more incentive and motivation to help you find deals.

Start with a mortgage broker, as opposed to your local bank. A mortgage broker is going to be more for investor-friendly and will have access to a much broader range of investment loan products. Don’t stop there. You also want to have relationships with hard-money lenders. These lenders provide short-term financing primarily for rehab projects. They work significantly different than traditional lenders in terms of how they value projects and how they determine lending limits. You will find them much more flexible than traditional lenders. Lastly, you should always be forging relationships with other investors and other private parties that may be interested in investing in your projects or partnering with you on your deals. Real estate investment clubs are a great place to meet these people.

The last thing you want to have happen is to spend value time and energy looking for deals and then have the deals fall apart because of lack capital and funding.

In order to be successful as a real estate investor you must have an aggressive finding or prospecting strategy. There is no way around this fact. If you are going to be buying deals you first have to be finding deals. The key to finding good deals is finding someone that is willing to sell their property for less than what it is worth – motivated sellers. People with beat up houses, vacant houses, condemned houses, foreclosed houses, etc. are typically the sellers that are going to be the most motivated.

The article below is good news for investors. These “squalid, dilapidated homes� are exactly what we are looking to buy. Now, we don’t want to run out and buy a hammered property just to buy a hammered property. We need to make sure we do our numbers and research the area so we don’t simply take on someone else’s trash. We need to have a strategy for making money; having said that, these are great properties to be looking at and evaluating.

These homes for sale stink

Never before have there been so many squalid, dilapidated homes on the market - and they’re helping to exaggerate already-plummeting home prices.

NEW YORK (CNNMoney.com) — Mold, maggots and piles of festering trash - no wonder home prices are in freefall.
It’s not just the sub prime mortgage crisis that’s to blame for plummeting home prices. A flood of squalid properties on the market is helping to exaggerate the post-bubble price declines.

“Part of the reason home prices are declining is a fundamental deterioration in the housing stock,” said Glenn Kelman, CEO of the online, discount broker Redfin. “During the boom, nine out of 10 houses for sale in many markets were in prime condition. Now, for every 10 houses, at least three are dogs.”

Most of these mutts are foreclosed properties that have been permitted to fall into disrepair by lenders overwhelmed with thousands of vacant homes. If these houses sell at all, they’re going for bargain basement prices that are hurting home values throughout the neighborhood.

“I’ve never seen so many houses in this condition before,” said Ray Anderson of Buyer’s Advantage Real Estate in Auburn Calif., near Sacramento. “And I’ve been in the business 20 years. I’ve seen bank-owned properties in the past. They were never like this.”

Distressed properties usually sell for discounts of 10% to 40% below comparable, well-maintained homes, according to Tom Inserra, executive vice president for Zaio, an appraisal company that is creating a national database of home values.

There always seems to be confusion in the marketplace about real estate “values�. We frequently hear about market values, tax values and appraisal values. It is important to understand what these values really mean and how to use them. Let me first say, the most important value is what the property will sell for on the open market. Don’t ever forget that. Listings that say “property listed $30,000 below appraisal� or “property listed 20% below tax value� mean absolutely nothing. It may sound attractive if a property is listed $30,000 below appraisal value, but if that is still $10,000 more than what it would sell for (market value) it’s still priced too high.

Oftentimes appraisal values and tax values don’t even come close to reflecting market value or what a property would sell for on the open market. I’ve been in markets where these values are $100,000 different than real market value.

What is comes down to, is researching what properties are actually selling for on the open market and using those values as your sales comparables or your comps. That is the best starting point in doing your market research. If other comparable properties are selling for $150,000 than your property will probably sell for roughly the same amount.

Don’t make the mistake of falling for creative marketing techniques about properties selling at a discount to appraisal or tax values. Do your homework, find out what properties are truly worth and you’ll make sound purchase and sales decisions.

Posted by Carter Brown

We have a really exciting announcement to pass along concerning two special event elective classes that will be taking place next week.

The first these classes is being put on by Landvoice who will be talking about finding and working with for sale by owner (fsbo) sellers. We all know that there are more motivated sellers hitting the market everyday. Learning to find and work with fsbo sellers will help you to find more of them … more quickly … and in many cases much more profitably than you other wise could.

The Landvoice class will be held on August 26, 2008 (Tuesday) at 6pm Mountain time (8pm Eastern).

The second of the two elective classes mentioned above will be put on by eProperty Office. This class will be dealing with all the benefits that come to real estate investors that have a strong web presence. A good website will help you to appear more credible as an investor and will also make your finding efforts more well rounded and robust. eProperty Office brings a wealth of knowlege and expertise to this elective class that will surely open your eyes to some of the possibilies that you may have been overlooking.

The eProperty Office elective class will be held on August 27, 2008 (Wednesday) at 6pm Mountain time (8pm Eastern).

You can register for either (or both) of the classes mentioned above by logging into the Success Center and clicking on the “Elective Classes” link on the left hand side of the page. Once in the Elective Classes section you’ll select “Real Estate” and then scroll through the listed classes until you find the titles that you’re looking for.

We hope you’ll join us for these two special presentations!

The piece below from the News, Trends and People section of Apartment Finance Today explains that the apartment market is still stable today, despite limitations on availability of financing. So far, it
states, there does not seem to be a significant impact on apartment rentals in most areas from the
inventory of houses and condos that have come into the rental market.

APARTMENT FINANCE TODAY – JULY/AUGUST 2008

The apartment market is showing signs of stability, although financing has become more difficult to
secure, according to the National Multi Housing Council’s (NMHC) latest Quarterly Survey of Apartment
Market Conditions. Demand for apartments remains strong, with more than 80 percent of survey respondents reporting a decrease in the number of renters leaving to become homeowners.

Mark Obrinsky, NMHC’s chief economist, noted that “even though there has been an increase in the number of condo and single-family rentals, these properties do not typically compete for the same renters as professionally managed apartments.� He went on to explain that “professionally managed properties may become even more desirable in the current market as renters of many of these individually owned condos and houses find themselves without housing because the owners of these properties have lost the property to foreclosure.�

The housing market downturn and financial market disruption are affecting multifamily financing, and
thus the volume of apartment property sales. Two-thirds of respondents noted that borrowing conditions had worsened compared with three months earlier, a reflection of the continued widening of spreads and tightening of credit standards. A record 76 percent of respondents reported that equity financing was less available. As a result, the Sales Volume Index declined to 13 this quarter, the second lowest reading in the NMHC Quarterly Survey’s history. Full survey results are posted at www.nmhc.org/goto/QuarterlySurvey08