Multifamily prices are getting closer to their pre-recession peak, but limited supply and favorable demographics could mean they keep climbing for some time, Fitch said Friday.
The ratings agency noted that because multifamily price figures can differ by location, the extent to which it can be used to draw an overall conclusion should be taken with a grain of salt.
That said, its research and a recent Freddie Mac report show multifamily property sales have reached a point where they are 25% below their record high.
The Fitch report also notes that real estate data provider REIS recently pegged the current national vacancy rate at 5.2%, a low not seen since 2001, and down from 8% in 2009. The ratings agency attributes this to a lack of new supply since the start of the recession.
The ratings agency said the U.S. Census shows the age 20-34 demographic that rents is likely to expand to 70 million people by 2025 from 66 million this year, and that construction is still not keeping pace with this growth.
In other news, Fitch said Friday that commercial MBS defaults, in general, are continuing to climb—but are within expectations.
"The rate of increase on new CMBS defaults will be roughly the same for the remainder of 2012 as last year as general performance continues to stabilize,” Fitch managing director Mary MacNeill told this publication.
Cumulative CMBS defaults in the fixed-rate conduit universe of deals between 1993 and 2011 reached 12.96% in the first quarter of 2012, up 25 basis points from yearend 2011.
Fitch defines as “defaulted” any loan that has been reported 60-plus days delinquent at least once. The percentage does not include loans refinanced at maturity. (Office and retail loans are, respectively, the first and second largest components of the overall CMBS default rate.)
