Fannie Mae and Freddie Mac still have housing blood on their hands from the 2008 financial crash. However, the giant GSEs, placed in government conservatorship in September 2008, have now, virtually all by themselves, created another bubble, this time in the multifamily rental market.

Fannie and Freddie made 53% of all apartment loans in 2016, that’s down from their combined 68% market share in 2012. So, their conservator, The Federal Housing Finance Agency (FHFA), recently eased the GSE’s lending caps so they can crank out, even more, loans.

Mary Salmonsen writes for multifamilyexecutive.com, “Currently, Fannie and Freddie are particularly dominant in garden apartments [and] in student housing, with 62% and 61% shares, respectively. The two remain the largest mid-/high-rise lenders but hold only 35% of the market.”

In a recent press release, Fannie Mae crowed, “Fannie Mae (FNMA/OTC) provided $55.3 billion in financing and supported 724,000 units of multifamily housing in 2016 – the highest volume in the history of its Delegated Underwriting and Servicing (DUS®) program.”

Cheap interest rates make for low Cap (capitalization) rates and nationwide, “Mid-/high-rise cap rates declined to 4.8%, and garden apartment cap rates to 5.6%, both historic lows,” writes Salmonsen. So, developers can build, lease up and flip projects at sky-high valuations.

Real estate profits are irresistible to developers and according to real estate firm Marcus & Millichap, Apartment builders “will bring 371,000 units to the market in 2017,” with project rents expected to rise 3.8% and vacancy by year-end to be 4%.

With Clark County Nevada being number three in the nation for in-migration with 46,375 people moving into the Las Vegas area between July 1, 2015, and July 1, 2016–127 a day– apartment builders are frantically putting up units and apartment buyers are bidding out-of-this-world prices for units. “Overall in Southern Nevada, investors paid an average of $110,111 per unit for apartment complexes this year by the third quarter, up 53 percent from 2015, according to brokerage firm Colliers International,” the R-J’s Eli Segall wrote late last year.

Segall listed some big ticket purchases such as, “Domain, at Coronado Center Drive and Eastern Avenue, which sold for $58.2 million, or around $189,000 per unit; The Wyatt, on Buffalo Drive just south of the 215 Beltway, which traded for $57.3 million, or about $185,900 per unit; and South Blvd, just east of Las Vegas Boulevard near Cactus Avenue, which sold for $53.6 million, or $167,500 per unit.”

Of course, every real estate developer figures he or she can sprinkle their magic dust on a project and make the rents go up. “Landlords are betting they can push rents higher in Las Vegas, whose rates trail that of other cities,” Segall reports. “They’ll probably be able to if jobs and wages keep climbing, and if many people, especially younger adults, stay as renters and don’t buy a place soon.”

However, Merrill Lynch, has a different point of view, believing millennials will move out of their apartments and buy homes. “Going forward, we expect a reversal driven by millennials in the housing trends that have dominated the marketplace for the last 10 years, including the rise in the rental rate and decline in the homeownership rate.”

But for now, here in Las Vegas, guys like Scott McClave, senior principal of acquisitions and finance at The Bascom Group, see nothing but clear sailing. When asked if the market was overheated, he replied: “If you look at the job and population growth, Las Vegas is still not quite building enough to meet that demand.”

Are rents getting too high? “Today, the average income-to-rent ratio is about 4:1, so it’s pretty easy overall for people to afford rents here. You look at an extreme market like New York or L.A., that ratio is more like 2:1,” McClave said.

When asked if apartment construction will continue, the truth came out. After saying everyone, remembers the crash, and new development is “measured,” McClave admitted, “But a builder will never pass on a construction loan. I understand the mentality. The mindset is always, ‘My building will be better, my building will out-lease everyone else’s.’ I don’t fault people for that.”

McClave’s company, Bascom, combined with Los Angeles-based Oaktree to pay $38.17 million for the 110-unit luxury complex, or $347,000 per unit, and almost 4 acres of adjacent land for $830,000, reportedly the most expensive apartment building sale ever in the Las Vegas area, as measured by price per unit.

The two companies again teamed up last year to buy 15 apartment complexes, a commercial center and about 20 acres of land for $630 million from Houston-based Camden Property Trust. That sale was said to be the most lucrative Las Vegas apartment deal in memory.

Crazy valuations combined with convenient rationalizations; it all has a familiar ring to it. Who knows how long it will last? We only know how it will end.

Originally published at LewRockwell.com.