Fannie Mae and Freddie Mac (also known as “GSEs”) have released their April reports on their mortgage portfolios and mortgage delinquencies. Both Fannie and Freddie report that serious delinquencies in multifamily are rising to multiyear highs.
(These numbers reflect the condition of mortgages in each agency’s portfolio, which are a major part of the overall mortgage market. Nearly half of the multifamily mortgage market are part of GSE portfolios.)
For April, seriously delinquent multifamily mortgages (90+ days delinquent) rose to 0.68 percent. That’s up from March’s total of 0.63 percent, and it was up from April 2024’s total of 0.44 percent. Fannie’s delinquency rate has risen quickly since December 2022 when the rate was 0.24 percent. Excluding the covid panic, Fannie’s delinquency rate is now the highest since 2010, but remains below the Great-Recession high of 0.8 percent. … skipping some graphs here… please see article. …
This isn’t necessarily a problem for multifamily housing cash flow since high interest rates also tend to push first-time homebuyers out of the for-purchase market and into multifamily rental housing. Potentially, this allows for multifamily owners to raise rents as putative homebuyers turn to multifamily housing instead.
Yet, there is good reason to believe that multifamily owners can’t simply raise rents in our presently stagnating economy. As the Federal Reserve admitted in its Beige Book summary last week, half of the US is experiencing an economy in decline, and retail layoffs had soared by nearly 300 percent so far this year. The Conference Board’s leading economic index continues to move toward recession territory.
So, conditions are not exactly ideal for landlords raising rents to make up for rising interest rates on multifamily mortgages.
Nor is there likely any relief in sight in terms of interest rates. The Trump administration’s continued embrace of mega-deficits will flood the economy with rising levels of government debt, causing more competition for mortgage-backed securities which will push down bond prices, thus pushing up interest rates further. The current upward trend in multifamily delinquencies is likely to continue.
Nope, they are between a rock and a hard spot because they will have a tough time raising rents while at the same time having higher mortgage payments. This is the risk that landlords take to do business. I do not feel sorry for them, one bit at all. They wanted the profits of having renters paying off the mortgage, thus having someone else pay for the land while taking the ownership. This is the risk they took and now they are paying the price of taking that risk. There are going to be bankruptcies in both the landlord business and the banking business because they were not properly assessing the risk of this sort of economy happening. Then, again, this may be much like the plandemic, well planned long in advance to do exactly what is happening. Could that be the case?