Investors need clarity on Fannie and Freddie
A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future editions, straight to your inbox.
The annual Zelman Housing Summit is a small but elite conference of public and private homebuilders, mortgage lenders, investors and financial analysts, run by one of the most well-known builder analysts, Ivy Zelman. When the conference started 18 years ago, it was focused primarily on residential housing. But by now the conversations have broadened – and this year’s conference focused particularly on multifamily, GSEs, labor and land.
Four years ago, Zelman’s firm was acquired by Walker & Dunlop, a commercial real estate finance and advisory company. It’s a top GSE (Fannie Mae and Freddie Mac) multifamily lender. CNBC sat down for a podcast with Willy Walker, its CEO.
Below are some highlights from our discussion and from the broader conference:
Interest rates
Much of the conversation at Zelman surrounded interest rates, as the 10-year yield dropped again Thursday when the conference began. Walker said he was surprised at where interest rates are now and doesn’t expect them to stay there.
“If you’d said to me three weeks ago that we’d have a 4.01% on the 10-year today, I would not have taken that bet,” he told CNBC. “Rates are much lower today than I thought they would be.”
But then he noted that if you go back to 1980 and look at the nine Fed rate-cut periods over that 45-year period, cuts made in a recessionary environment brought longer-term bold yields down. Outside a recession, there was really no impact on long-term interest rates.
“So as much as I’m expecting us to see at least a 25 basis point cut, and then probably another 25 basis point cut, even if you take 50 basis points out of the short end of the curve, I don’t expect it’s going to impact the long end of the curve very much,” Walker said.
Fannie and Freddie
For builders as well as multifamily developers, the future of Fannie Mae and Freddie Mac are critical, and the uncertainty around what the Trump administration will do with them was a hot topic at Zelman.
Walker noted that while commercial real estate suffered broadly in the past three years due to higher interest rates, multifamily had an advantage. When banks or CMBS issuers might not have been lending, Fannie and Freddie were always in the market to provide liquidity.
Now the conservator of the GSEs, FHFA Director Bill Pulte, as well as Treasury Secretary Scott Bessent have said there will be action to take the companies private and then ultimately to the public markets. Pulte told CNBC recently that the two would stay in government conservatorship and he expects to sell about 5% of them into the public markets.
Walker & Dunlop chairman and CEO Willy…
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