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Multifamily Gets a Boost as Buying a Home Becomes Less Affordable

Starts for multifamily housing jumped 10.3% in October as construction of single-family homes fell, indicating that with Americans finding it increasingly difficult to become homeowners, the multifamily segment could be poised to benefit.

Single-family homes are becoming less affordable, sales of new homes are slumping, and, as the Commerce Department reported last week, construction of single-family homes fell for a second straight month in October. With interest rates rising, borrowing costs are up as wage growth trails house price inflation.

But people still need to live somewhere. And if they can’t afford to buy, they typically end up renting.

Your opinion is important to us: What do you want to know about multifamily lending?

As home-buying moves out of reach for many Americans, multifamily housing starts rose to a rate of 363,000 units in October, following a 15.6% decline in September, according to Moody’s Analytics.

And that trend could continue in the next few months, said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

“Many renters have opted to renew their existing leases because they feel they are priced out of the housing market,” Vitner told Reuters. “We could see a bit more strength in apartment starts in coming months.”

The Mortgage Bankers Association’s survey of multifamily originations found a 17% increase in the dollar volume of loans for multifamily properties in Q2 2018 over the same period last year, which followed an 18% year-over-year increase in Q1.

However, Freddie Mac said earlier this year it expected multifamily origination volume growth to slow in 2018. Of the record $285 billion in multifamily mortgages in 2017, just under half ‒ 46% ‒ was funded by Fannie Mae and Freddie Mac, the MBA said.

Top 5 Multifamily Lenders

The top five multifamily lenders by dollar volume in 2017 were Wells Fargo, CBRE Capital Markets, JPMorgan Chase, Walker & Dunlop and Berkadia, the MBA found in a recent report.

The report, released last month, found that loans to multifamily properties climbed 6% last year, to a record $285 billion, and that some 2,554 lenders made loans backed by multifamily rentals in the period.

Sample CrediFi’s multifamily lending data. View Berkeley Point Capital’s  loans with borrower and property information. 

The record lending came as the supply of multifamily housing reached a 30-year high.

“The multifamily lending market in 2017 benefited from improving fundamentals, rising property values and low interest rates,” said Jamie Woodwell, MBA’s vice president of commercial real estate research, in its annual report on the multifamily lending market. “Demand came from borrowers and lenders of all sizes, with loan amounts ranging from thousands of dollars to hundreds of millions,” he added.

JPMorgan reportedly made 5,576 multifamily loans totaling $17.66 billion, Wells Fargo 1,350 loans totaling $20.81 billion, and CBRE Capital Markets 1,135 loans totaling to $17.67 billion.

View Berkeley Point’s lender profile. Sample CrediFi’s multifamily data.

Related stories:

With Multifamily Supply Up, What Will Happen to Demand?

How We Analyzed Bank OZK’s Real Estate Lending

The Two Boston Real Estate Trends Highlighted by This CRE Loan

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Alex Veksler has 16 years of finance, data analysis and project management experience. He is a former vice president at Morgan Stanley, where he worked on product control of equity and fixed-income derivatives products as well as various projects involving finance and technology, such as revamping risk attribution and balance-sheet systems for profits and losses. Alex has previously worked at hedge funds, most recently as a director at Exigent Capital. He has a bachelor’s in computer science from Yeshiva University and an MBA from New York University.

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