IndyMac Shutdown Means Little to Multifamily, Says NAHB
- Jul 17, 2008
By Anuradha Kher, Online News EditorWashington, D.C.–From the IndyMac shutdown to the takeover plans for Fannie Mae and Freddie Mac, each headline in recent weeks has brought more bad news for the economy than the previous one. While none of this news has been good for the housing industry, multifamily industry experts tell MHN that they are not pushing the panic button just yet.“The IndyMac shutdown means little to the multifamily sector, or even to the housing industry,” Jerry Howard, executive vice president and CEO of NAHB, tells MHN. “Their sub-prime loans business had already ceased, and their lending to residential development was down, just as it is in other financial institutions.”While shares of Fannie Mae and Freddie Mac plummeted last week on fears about their financial stability, the Bush administration rolled out a rescue plan to bail them out. The plan has still not been passed, but Howard says whatever happens, the multifamily industry has no reason to be worried about the two companies continuing to be sources of finance. “Fannie and Freddie raise the funds necessary to purchase multifamily loans by selling debt. That market is working well, as evidenced by the Freddie Mac sale of securities worth $3 billion on Monday. Furthermore, as the financial condition of other financial institutions continues to deteriorate, Fannie and Freddie will continue to be the primary outlet for multifamily mortgages until the credit market returns to a more normal condition,” he says.However, Howard goes on to say that a severe credit crunch is hitting the multifamily industry, just as it is the rest of the residential real estate market. “Builders are having an extremely difficult time getting credit to build or acquire residential property. This is true even in markets that have not shown the dramatic fall in prices or production that have dominated the headlines,” adds Howard.This is a very troubling trend since residential developments, particularly rental projects, take several years from concept to construction, Howard believes. “If the companies that create rental projects cannot get a start on acquiring and preparing land now, there will ultimately be a shortage of new units when the recovery begins,” he concludes.