Western States CREF: 5 takeaways for multifamily market participants

The years of 3 percent debt and 7 percent rent growth were the anomaly.

Today’s market is closer to historical norms. Capital and credit are available, but lenders are more selective about where they put it. Assets with good in-place cash flow, strong sponsorship, a solid basis, and limited supply risk are getting the most attention.

Financing has not disappeared. The bar is simply higher.

For borrowers, that means the underlying real estate matters more. So does the sponsor’s ability to explain the business plan and support the numbers.

Both agencies have meaningful capacity as we head toward year-end.

Through August, Fannie Mae reported $41.7 billion in multifamily new business volume, while Freddie Mac reported $31 billion in total new business loan purchases through Q2. Both are operating under an $88 billion 2026 loan purchase cap.

The fundamentals have not changed much. Strong sponsors, good in-place cash flow, and affordable or mission-rich transactions continue to get the most attention.

Where we are seeing more movement is in structure.

The agencies have shown a willingness to stretch on the right deals, including lease-up transactions in select markets. We are also seeing 35-year amortization and debt-service coverage as low as 1.20x on certain 10-year executions.

Freddie has shown flexibility around 1.20x coverage on 10-year terms and buy-downs of up to 3 percent. Fannie has been willing to move earlier in the lease-up window and can be very competitive on affordable transactions, including 1.20x coverage with 35-year amortization.

There is no simple answer to which agency is more competitive. It depends on the deal.

The better approach is to look at both and understand where each one is willing to stretch.

For owners with a maturity approaching over the next year or two, one of the most important actions they can take is also one of the simplest. Start early.

Actively evaluating maturities at least 12 months in advance allows for time to understand where the deal stands, work through any issues, compare options, and watch the market without being forced into a decision.

It is also important not to assume that a Fed cut will automatically translate into a meaningful drop in long-term rates. Depending on what the market has already priced in, a 25-basis-point Fed move may result in only a 5- to 15-basis-point move in the 10-year Treasury.

If a deal works today, that matters. Waiting may pay off. It may not. Starting early gives you the flexibility to watch the market and still move when the execution makes sense.

Proceeds matter. Does the deal need every last dollar, or can the sponsor put in more equity?

Term matters. Is this an asset the sponsor plans to hold for the next five to 10 years, or is an earlier sale or refinance more likely?

The property itself matters too. A stabilized asset has different financing needs from one where there is still capital to invest or value to create.

That is why rate is only one part of the decision. Sponsors are also looking at proceeds, structure, flexibility, hold period, and how well the financing supports the broader business plan. The lowest coupon is not always the best answer.

For properties that have worked through operating issues, the path back to agency financing comes down to showing that the improvement is real and sustainable. Lenders want to see occupancy firming, retention holding, concessions burning off, and rents moving in the right direction.

Vacancy, bad debt, and concessions all factor into the analysis, along with the broader outlook for occupancy and rent growth. Even when a property is outperforming the market, lenders want to understand why and whether that performance can continue.

The more the financing can be supported by actual operating results, the easier it is to get comfortable with the asset.

Exit analysis is also getting more attention.

Both agencies want to see a realistic path at maturity. Their methodologies differ, but both consider future occupancy, rent growth, and cash flow. More conservative assumptions can affect proceeds and the amount of interest-only available today.

If new supply continues to moderate and occupancy and rent growth improve, that should help over time. For now, it is expected that lenders will stay focused on whether the exit works under realistic assumptions.