The multi-family sector of the housing market is flashing bright, neon lights these days, according to CoreLogic’s Economic Outlook for May 2019. What is causing this luminosity? Millennials are flocking to the rental home market.
According to CoreLogic, the country’s largest metros account for the bulk of multi-family demand. The five largest metros by population are also the five metros with the largest amount of multi-family lending. The ten largest metros by dollar volume represented 40% of multi-family lending during 2018. The 15 largest metros represented 50% of apartment lending in the US.
Concentrated in high-density metro areas, here are the metros with the highest multi-family originations in 2018:
New York 8.3%
Los Angeles 8.0%
Houston 3.9%
Dallas 3.8%
Chicago 3.3%
Phoenix 2.9%
Multi-family loan size originations by dollar amount averaged approximately $100,000/apartment in 2018. Large projects in high-cost metros accounted for the largest loan sizes. Approximately 50% of loan originations were for loans of $20M+.
Here are the loan distributions based upon dollar amounts:
22% – $5M or less
9% – $5.0M – $9.9M
14% – $10.0M – $19.9M
12% – $20.0M – $29.9M
43% – $30M+
Multi-family lending by property size looked like this in 2018:
17% – 5-20 apartments
12% – 21-50 apartments
11% – 51-100 apartments
29% – 101-300 apartments
31% – +300 apartments
Two million apartments were financed in 2018. Three in ten apartments were in buildings with fifty or less apartments and three in ten apartments were in buildings with 300 or more units.
According to CoreLogic’s chief economist, Frank Nothart, “The strength in rental home demand and the increase in property values should lead to an origination volume in 2019 that is close to 2018’s level.”
