Soundview Insights

The annual commercial and multifamily conference of the Mortgage Bankers Association last week offered a few nuggets as to the state of the real estate financing market:

• It was a record year, with a total of $900 billion in commercial and multifamily lending nationally, with expectations for $1 trillion in 2022, driven by strong pricing and rent growth.
• Multifamily volume soared by 54% to over $400 billion, Industrial volume was up by 140%, while Office, Retail and Hotel lending still lagged pre-pandemic levels.
• In spite of the significant increase in multifamily lending, Fannie Mae and Freddie Mac actually reduced their volume by 17% due to their regulatory caps.
• Multifamily, industrial, and self-storage are the property types with the most liquidity and tightest pricing, while there is now at least modest interest in lending on retail and hotels properties (while there was almost no interest six months ago)
• Lenders have concerns about the future of the office, with the most comfort financing the best buildings given the belief that tenants will opt for the best space in order to attract and retain talent.
• Private lenders – especially for bridge and construction loans – are increasing their market share relative to other types of lenders. 
• Given their large increases in volume in 2021, many private lenders have increased their minimum and maximum loan sizes, resulting in shifts in the list of lenders that will have interest in a loan of a certain size as some lenders have outgrown that loan size while others have grown into it.
• Non-recourse bridge loans over $8 million are generally priced in the mid 3% to low 4% range and have proven popular with their relatively higher leverage and limited prepayment limitations in a market of rapidly rising rents and values.
• Private non-recourse construction loans continue to get more competitive with interest rates as low as the mid 6% range at 75-80% LTC.
• Fannie Mae and Freddie Mac are required to have at least 50% of their multifamily production secured by properties that are affordable to those with low to moderate incomes, and 25% (vs 20% in 2021) secured by those with low incomes (60% AMI). As a result, in spite of the 11% increase in their regulatory volume cap for 2022, they are expected to be even less competitive lending on Class A properties but highly competitive on Class B/C properties. (Quotes for 5-year agency loans on B/C properties can still be under 3.0%).

Yardi Matrix recently released some data, and it showed that multifamily had a great year in 2021. This was due to a number of factors, including some COVID-delayed surges in job recovery and increased mobility.

And demand has skyrocketed, assuaging the fear that overbuilding would impact the industry's 2021 and 2022 growth.

The top 10 markets for unit deliveries in the multifamily sector accounted for 42% of the national volume. Those metros included:

• Dallas
• Houston
• Miami Metro
• Austin
• Atlanta
• Washington DC
• Orlando
• Los Angeles
• Charlotte
• Phoenix

Occupancy rates in multifamily properties have reached stability as the demand for rentals in metro areas continues to grow. For more on the statistics and performance of these metros in 2021 and other insights, check out the link below.

With supply chain shortages affecting all major industries around the globe, now is the perfect time to focus on the preventative maintenance of real estate properties.

An article from Multifamily Insiders highlights the importance of preventative maintenance. Not only does it keep the residents happier, but it also saves property managers and owners a ton of money when it comes to repairs.

The article uses air filters as an example. A small, unglamorous part of maintaining a multifamily property, but replacing air filters in a timely manner can save a rental property thousands of dollars in parts, labor, and time over the long run. Identifying these and other areas where preventative maintenance could play a role in mitigating costs and lengthy renovation projects is likely going to continue to be a top priority for multifamily buildings.

For more on the power of preventative maintenance, click the link below.