2024 is poised to offer significant opportunities and changes in real estate. This is especially true in the multifamily real estate investment category. We can see key indicators from the FHFA, the Federal Reserve, and Freddie Mac. They suggest that after a sluggish 2023, the market is gearing up for increased transaction volume.
In particular, one of the driving factors behind this positive outlook is the stabilization of interest rates. As the market gains momentum, it’s essential to understand the policies that will come into play in the coming year. In this article, we’ll unveil what you can expect on what’s coming in the industry.
FHFA Shifts: Impact on Workforce Housing
The Federal Housing Finance Agency (FHFA) made a significant announcement on November 14. It stated that in 2024, Fannie Mae and Freddie Mac will see a reduction in multifamily lending caps to $70 billion each. This totals $140 billion for the year.
According to FHFA, these reduced caps align with current market forecasts. Still, they will closely check it. FHFA will not further reduce these caps if the market proves smaller than anticipated.
In 2023, FHFA created a special category for mission-driven workforce housing, but it still had limits. This year, an extensive change happened. It’s the removal of the limit on loans for supporting workforce housing properties. It seems FHFA aims to increase lending in the workforce housing sector by removing these limits.
Increase in Multifamily Real Estate Transactions
Scott Belsky, Managing Director of Partner Valuation Advisors, predicts a surge in transaction activity for 2024. This is due to two critical factors:
- Loan Maturities and Interest Rate Stability: Multifamily transactions from 2020 to 2022 relied on short-term, floating-rate debt. These loans mature or need costly interest rate cap extensions. Thus, transaction volumes are expected to rise.
- Interest Rate Stability: Market volatility created a gap in buyer-seller expectations. Stabilizing interest rate expectations are likely to narrow this gap. This will foster increased transaction volume in 2024.
Additional Observations on Multifamily Real Estate
The Mortgage Bankers Association (MBA) forecasts a 26% increase in lending activity. This is for all 2024 asset types, totaling about $559 billion. Thus, multifamily real estate transactions are projected to increase by 19%, with a lending amount of $339 billion.
Also, Freddie Mac’s 2024 Multifamily Market Outlook supports these predictions:
- Despite expected elevated interest rates, stability is anticipated. This stimulates multifamily lending volume.
- This stability should lead to more agreeable asset valuations, encouraging increased transaction activity.
Limited housing availability and expensive homes boost the resilience of the multifamily market in the long run. Additionally, the emergence of the next generation of renters contributes to it.
New Radon Testing Regulations in Effect
Effective June 30, 2023, new radon testing standards for Fannie Mae and Freddie Mac multifamily real estate loans came into play. Key changes include:
- Mandatory Radon Testing: Radon testing is now required for all multifamily Enterprise-backed properties. It is irrespective of location, with some exemptions and deferrals.
- Increased Testing: The authorities raised ground-floor unit testing from 10% to 25%. At least one test per building is now mandated.
- Quality Control: No more than 15% of tests can be lost, faulty, or inaccessible. Environmental professionals have discretion in such cases.
- Tenant Notifications: Property representatives must inform tenants about radon testing. This includes access and sampling condition requirements.
- Guidance: Lenders and environmental consultants receive more direction on radon standards. This reinforces the need for compliance with state and local radon laws.
FHFA continues to watch the multifamily mortgage market. They work with the U.S. Environmental Protection Agency (EPA) to review possible changes to these standards in 2024.
New Data Collection Requirements on the Horizon
The beta phase of Fannie Mae’s expanded data collection requirements for Property Condition Assessments (PCA) and Seismic Risk Assessments (SRA) is coming. Expect an announcement of new requirements. The release of updated standardization forms will follow shortly.
Fannie Mae is considering adding more than 30 data points to PCA. Three data points are primarily related to climate resilience. They would include it in SRA.
Moreover, the digital due diligence approach allows fast access, analysis, and use of property data. This facilitates faster and more informed decision-making.
Getting Expert Advice to Stay Updated
In 2024, the multifamily real estate market gains momentum. Investors can gain an edge by working with seasoned consultants. Remarkably, these experts focus on multifamily deals and various lending options.
Therefore, choose consultants providing thorough due diligence and valuation services. Also, obtaining all necessary third-party reports from a single source saves time. It ensures consistency in property data across reports.
Frequently Asked Questions
What factors to consider before investing in multifamily real estate?
There are factors you must consider before investing in multifamily. These factors include location, property condition, and potential for rental income. Conduct thorough research to make informed and successful investment decisions.
How does the current economic climate impact multifamily real estate in 2024?
The current economic climate in 2024 may influence the industry through interest rates. Employment rates and market stability are also prime factors. If you’re an investor, you should stay informed about economic trends to navigate the market.
How can I get started in Multifamily investment?
To start investing in multifamily real estate, consider researching local markets. You can secure financing and consult with experienced real estate professionals for guidance.
Conclusion
In 2024, people who invest in multifamily real estate can enjoy more property buying and selling activity. New rules and collecting more information can also create more chances for success. Being well-informed is essential to enhance opportunities in this promising market. Furthermore, working with experienced professionals increases your chances of success.
About StoutCap:
StoutCap focuses on helping accredited investors build passive income and wealth through multifamily real estate investments. As a private real estate investment firm, we work across the United States. Strategically, we acquire and manage multifamily assets in high-growth markets. Our mission is to provide clients with the opportunities and expertise needed to reach financial goals in the dynamic world of real estate investing. Explore the potential of multifamily real estate with us.
