Banks are lending big money to apartment developers. In 2013, lenders provided $172.5 billion in new mortgages for apartment buildings. This is a 18 percent increase since 2012. The Mortgage Bankers Association report stated 2014 is on the same pace as 2013 lending. The top five multifamily lenders in 2013 by dollars volume were JP Morgan Chase, Wells Fargo, PNC Real Estate, CBRE Capital Markets, Inc. and KeyBank.
Both JP Morgan and Wells Fargo reported dramatic drops in residential mortgage lending to consumers compared to the same quarter in 2013. With residential lending down, the bigger banks are desperate for loans and become very aggressive on multifamily projects. Multifamily starts are up 18.5 percent while single-family housing starts are up 1 percent between August and September.
Millennials are one reason behind the multifamily surge. It’s becoming more difficult to buy their first home causing people to rent longer. The multifamily segment is surrounded by high rents, low vacancies and increased popularity making it very attractive to lenders.