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Fannie: 2019 will be a busy year for multifamily lenders

Multifamily lending volume this year should exceed the 2018 level, Fannie Mae projects.

Fannie expects lending in the space to fall within the range of $290 billion to $310 billion in 2019, which would be slightly higher than the estimate for 2018 multifamily volume.

apartmmarket“We’re thinking that last year was probably about $290 to $295 billion,” said Fannie’s Kim Betancourt, director of economics and market research at Fannie Mae.

“There are a number of reasons why we think these are drivers for an uptick in origination activity,” said Betancourt, who spoke to Scotsman Guide News ahead of Fannie’s planned release this week of a multifamily forecast for 2019.

Betancourt said both investors in new properties and existing property owners should produce fertile ground for lenders.

“There is a lot of new supply that will be expected to come online this coming year that is under construction, and should complete and deliver this year,” Betancourt said. “That means there will be brand new properties available for investors to buy, leading to more originations.”

On the refinance side, she said borrowers holding short-term loans will be motivated to seek loans with longer terms.

“Even though interest rates are slowing climbing, they are still fairly low,” Betancourt said. “I mean historically low.”    

Betancourt also expects no significant impact from the partial government shutdown on multifamily lenders. As of Monday, the budget impasse over funding a southern border wall stood at a record 31 days, with no clear path to a resolution.

“I would say not in terms of financing,” Betancourt said of the shutdown’s potential impact on lending flows. “It will be more of a strain obviously on tenants if they are furloughed. Government workers aren’t getting paid, and if this goes on for a while, that could be an issue of if housing vouchers get impacted and this goes past March,” she said.

NYC, Boston, Chicago are oversupplied  

Multifamily market fundamentals, such as occupancy and rental rates, should remain solid on a nationwide basis in 2019, but the story is uneven across markets, Betancourt said. A few markets, such as Boston, New York City and Chicago, are oversupplied with apartment units.

In Boston, Betancourt said roughly 14,000 new apartment units were forecast to be delivered in the near term, but the forecast for job growth only translates into the need for 9,500 additional apartment units in 2019.

The New York City metro area will be similarly oversupplied, with 38,000 units projected to come online and demand for just around 21,000, Betancourt said. Amazon decided this year to locate one of its new headquarters in Long Island City along the East River in Queens.

Betancourt said an influx of highly paid tech workers will eventually give the apartment market a much-needed boost, but won’t have much impact this year.

“There is a lot of supply in Long Island City, and I think there are a lot of property owners that are breathing a sigh of relief that Amazon is going to be coming there,” Betancourt said. “That has helped the market definitely. But again, that is going to be a little bit more longer term than shorter term.”

Some cities with strong job growth will be undersupplied with apartment units in 2019. Las Vegas, for example, has just 2,000 units underway, but demand for roughly 6,500, given the strong job growth in the city, Betancourt said. Similarly, fast-growing Phoenix expects to bring online about 7,400 apartment units in 2018, but has need for 11,000 multifamily rental units.

“There are also sort of winners in this scenario, and some of those winners are metros like Orlando, Phoenix and Las Vegas,” Betancourt said.


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