According to Dr. Frank Nothaft, chief economist with CoreLogic, Millennials are adding to the already strong demand for multifamily rental units. Nothaft believes this demand for multifamily rentals will only increase in the coming year.
Values for multifamily units are up from the Great Recession trough and property owners are able to tap into equity created by its value growth through new mortgage originations. The five largest metros by population are also the five metros with the largest amounts of lending for multifamily units.
Take a look at the metros with the highest percentages of multifamily lending:
- New York – 8.3% of lending was for multifamily units
- Los Angeles – 8.0% of lending was for multifamily units
- Houston – 3.9% of lending was for multifamily units
- Dallas – 3.8% of lending was for multifamily units
- Chicago – 3.3% of lending was for multifamily units
- Phoenix – 2.9% of lending was for multifamily units
- Atlanta – 2.7% of lending was for multifamily units
- Washington DC environs in VA, MD, WV – 2.7% of lending was for multifamily units
- San Francisco – 2.7% of lending for multifamily units
- Seattle – 2.5% of lending for multifamily units
Overall, 50.8% of all multifamily lending during 2018 was used to finance 2M apartment units. The 10 largest loan amounts for multifamily units (approximately $30M+) accounted for approximately 40% of apartment lending and the 15 largest loan amounts represented 50% (approximately ($20M+) of apartment lending in the US.
Obviously, loan sizes for multifamily units varied by property values, building sizes, lien priority and the number of parcels securing the loan, just as loan sizes varied for single-family units and individual condominiums and co-ops. The average loan size for single apartment within a multifamily unit was $100,000.
Because close to 90% of the dollar amount of multifamily debt is outstanding, Nothaft of CoreLogic believes that 2019 loan originations for multifamily units will be “…driven by acquisitions, refinanced old loans and the placement of mezzanine debt.”
That CoreLogic is expending large chunks of staff time and resources on multifamily trends and lending is a sure sign that the trend towards increased demand for multifamily investments and living will only increase in the coming years.