The recent Fitch downgrade of Fannie Mae and Freddie Mac has led to questions and uncertainty around the financial markets. These two government-sponsored enterprises (GSEs) are the largest mortgage lenders in the United States, and their downgrade to AA+ from AAA reflects wavering confidence in the credit markets.
We see the primary impact being in the single-family housing market, where the Fitch downgrade could lead to higher mortgage rates and short-term volatility. This could make it more difficult for some borrowers to qualify for a mortgage, and it could also lead to sellers delaying their listing plans. With fewer first-time homebuyers exiting the rental market and less supply for those looking to purchase a home, we should see steady apartment rental demand.
While residential real estate has historically been a good hedge against inflation, this news is a reminder that it is also subject to market fluctuations. Carefully assessing each investment opportunity and putting a focus on diversification is essential to weathering market changes.
Despite some uncertainty around Fannie Mae and Freddie Mac, our Roers Companies team remains convinced that multifamily real estate is a good long-term investment. We do not foresee an impact on our ability to secure permanent financing for our projects through Fannie Mae/Freddie Mac as a result of this rating downgrade. Multifamily properties — and multifamily investments with Roers Cos. in particular — offer a number of advantages, including:
- Stable cash flow: Rents are typically less volatile than home prices, which helps to mitigate risk.
- Diversification: The privately held multifamily investments we offer are not correlated with the stock market, which helps to reduce overall portfolio risk.
- Inflation protection: Rents tend to rise with inflation, which can help preserve the value of your investment.
It’s smart to diversify your portfolio and not put all of your funds in one asset type or geographical area. If you are considering investing in multifamily real estate, we recommend that you speak with a member of our investor relations team to learn more about the opportunities available.
