Multifamily Building Permits

Multifamily Development Year-End 2016 | Arbor

Year-end data released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development on new residential construction, including data for multifamily buildings (classified as structures with five or more units), showed that multifamily development continued its strong run during 2016.

Multifamily Building Permits

Authorizations of privately-owned residential housing units in the United States in buildings with five units or more were at a rate of 410,500 units at the end of 2016, down from 454,500 units at the end of 2015, and representing 35% of the total housing permits issued. The 2015 total was the highest year-end total since 656,600 units in 1987.

How Big is the Rent Affordability Problem?

Rents in the United States have been rising faster than incomes for several years, demanding a larger share of household budgets. In fact, nearly one-third of American renter households contribute 50 percent or more of income towards rent.

Are Small Asset Rentals Less ‘Severe’ on Renter Budgets?

Following the definition used by the Harvard Joint Center for Housing Studies (JCHS) in their recently released 2016 annual report, “State of the Nation’s Housing”, we examine two categories of cost burdened renters — Moderately Burdened and Severely Burdened households.

Moderately Burdened households are those paying between 30 percent and 50 percent of their household income towards rents, while Severely Burdened households pay 50 percent and up.

About 25 percent of households in small properties (5 to 49 units) fall in the Moderately Burdened category, slightly higher than the 24 percent share in large properties (50+ units).

Measuring renters that are severely burdened, the share is slightly higher for households in large properties (30 percent) than small properties (28 percent). Overall, the share of households that are Moderately or Severely Burdened is only slightly higher for large property renters.

As shown by comparing the two charts below, the affordability issue in small properties is experienced to a greater degree by lower income households. Severely Burdened households are mostly concentrated in the lowest income groups in both asset types.

Which Markets have the Biggest Affordability Problem?

High cost burdens for households living in small properties is characteristic of many metro areas. In some cases — like New York for example — incomes are high but rents are relatively higher. In other cases, such as Baltimore, rents may be low but incomes are even lower on a relative basis.

As shown in the chart below, the share of Severely Burdened households living in small assets was higher than the national average for Seattle (29 percent), New York (31 percent), Baltimore (34 percent), Los Angeles (35 percent) and Atlanta (38 percent).

The picture changes significantly in the large property market, where the share of households in New York that are severely burdened drops below the national average. Larger assets come with luxury finishes and comprehensive amenity packages in many instances, so rents are high — but incomes are relatively higher. Similarly, in San Francisco, high rents are offset by high incomes at large properties.

From the landlord’s perspective, cost burdens for households in small properties are likely a constraining factor in raising rents further. Notably, the analysis above does not consider property quality.

In some markets where burdens are low, the low quality of the small property rental stock will constrain rent growth as well. In order to raise rents at a low quality asset, investors should look consider value-add repositioning strategies.

Learn more on Alex Chatter.

A Look at the Most and Least Expensive Multifamily Investment Markets

Memphis (left) is the least expensive major multifamily investment market on a price-per-unit basis, while San Francisco (right) is the most expensive.

As we enter the fall buying season, it’s useful to look at pricing in major multifamily markets through the first half of the year. Not only in the priciest markets, but also in markets that may represent higher yield opportunities.

Using transaction data compiled by Real Capital Analytics, we calculated the average sale price in the top 50 markets in the U.S. — specifically, the weighted average price per unit paid for apartment sales transactions over $2.5 million recorded during the 12 months ending in June 2016. The average price for the U.S. overall during that time was $134,000/unit.

Most Expensive Markets

San Francisco ($492,500/unit) was the highest priced multifamily investment market over the last 12 months. Its local economy has been boosted by the expansion of the technology sector, while opposition to new development has limited new supply. Given those attributes, San Francisco should remain among the more favored markets in the long term.

Manhattan ($485,800/unit) was second on the list, weighted heavily by the purchase of Stuyvesant Town and Peter Cooper Village for $5.3 billion at the end of last year. New York City remains the favorite destination for international investment capital. However, investors of all types have begun to approach this market with caution as the luxury condominium market has slowed recently. The area also now has the highest level of new development in the pipeline of any multifamily market in the country.

The third highest priced multifamily investment markets was also in the Bay Area: San Jose ($334,800/unit). Boosted by a strong local economy built around Silicon Valley’s entrepreneurial spirit, San Jose’s long-term forecast remains bright.

Washington, D.C. ($284,500/unit) and Boston ($257,200/unit), two additional traditional international gateway investment markets, rounded out the top five highest priced markets.

Least Expensive Markets

It’s also useful to look at recent sales transactions in the lowest priced multifamily markets, to see where high-yield opportunities may lie.

“The secondary and tertiary markets of the U.S. have apartment assets that price at a lower rate per unit and also at higher cap rates,” said Jim Costello, Senior Vice President at Real Capital Analytics. “In the six major metros, cap rates came in at 4.8% in during Q2 2016 versus a 6.4% rate in the secondary and tertiary markets. Given that GSE debt is priced about the same across markets in terms of mortgage rates, it implies more positive leverage opportunities in the secondary and tertiary markets.”

The lowest priced market over the last 12 months was Memphis ($54,600/unit). Memphis is expected to maintain strong economic growth as a major transportation hub with a healthy job market, low business costs, and an attractive downtown area.

Indianapolis ($57,600/unit) was another strong market that finished at the bottom of the list. The local economy is expected to continue its recent expansion, which has been driven by low business costs and favorable demographics, along with gains in employment in the high-tech and life sciences sectors.

Three Ohio markets, Cleveland ($59,600/unit), Columbus ($63,100/unit), and Cincinnati ($77,300/unit) were among the lower priced markets. Data from Real Capital Analytics shows that the average apartment cap rate in Ohio came in at 7.6% in during Q2 2016. The local economy in these markets should continue to pick up steam in the near term, based on strong growth of healthcare and professional services sectors.

Houston ($73,700/unit), where the local economy has been hurt by falling energy prices, rounded out the top five lowest priced markets.

Learn more on Alex Chatter.

Arbor LoanExpress Attains New Efficiency And Client Service Milestones For Multifamily Borrowers And Brokers

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Uniondale, NY According to Arbor Realty Trust, Inc., a real estate investment trust and national direct lender specializing in loan origination and servicing for multifamily, seniors housing, healthcare and other diverse commercial real estate assets, its Arbor LoanExpress (ALEX) online agency loan origination and processing platform has reached three new efficiency and service milestones upon its one-year anniversary mark. In only one-year’s time, ALEX helped rapidly close 426 loans and process $2.3 billion in loan volume while ultimately saving nearly 24 hours per loan in processing time.

As a Top 10 Fannie Mae DUS Multifamily Lender for the past decade and Freddie Mac’s Top Multifamily Small Balance Loan provider, efficiency and customer service are at the crux of Arbor’s business and success.

“Leveraging technology advances to deliver a faster and more efficient origination and processing experience is a primary focus and a core part of our business strategy, “ said Ivan Kaufman, Arbor’s president, chairman and CEO. “In 12 short months, ALEX has delivered an easy, efficient and transparent financing environment for borrowers and brokers alike. We have only scratched the surface of what we intend to deliver to our clients in the near future.”

Within its first year of service to Arbor clients, ALEX has also provided the company with new avenues to business generation across the growing online real estate investment market. As part of this new level of reach within the multifamily market, ALEX’s news blog, ALEX Chatter, has provided multifamily investors exclusive insight and research into the small balance investment market through its partnership with Chandan Economics.

While ease, efficiency, 24/7 loan document management, mobile access and e-signature execution were some of the hallmarks of ALEX’s first year in business, the platform is now working on several additional initiatives. These include integrating ALEX with several significant broker client systems; incorporating a seniors housing financing component; and delivering continual process and experience enhancements that will increase loan processing time savings and ease of use.

This post was originally published on New York Real Estate Journal

 

Millennial Renters are Essential to Small Property Apartment Demand

In this closer look at Millennial renters, we find they are well-represented in small, low-amenity properties.

Developers and investors typically think of Millennial renters as determined to live in large, high-rise properties in urban cores. This new generation of renters prioritizes walkability and access to both in-building and local amenities. While this characterization may be true of many young renters, a closer look at the data shows they are an even more important source of demand for apartments in smaller properties.

Do Millennials Renters Live in Small Properties?

  • Consistent with generally-held views regarding younger Americans’ housing preferences, Millennials (here defined as individuals currently between 18 and 34 years of age) tend to be renters. As of Q2 2016, the rentership rate for this cohort, including all living arrangements other than ownership, was 65.9 percent according to the U.S. Census Bureau.
  • While Millennials account for 23 percent of the total population, they are a significantly larger share of the renter population. As shown above, Millennials accounted for 38 percent of the nearly 28 million renters in small properties in 2014. In comparison, their share of the large property renter population was lower, at 32 percent.

What do Millennial Renters Do?

  • The basic activity profile of Millennial renters is similar across small and large apartment buildings. As shown above, nearly 85 percent of this age cohort work in salaried jobs. While some overlap, 25 percent worked and also attended college or university programs. Just 3 percent of Millennials living in apartments reported being self-employed in 2014.

How Much Do They Earn?

  • The annual income of Millennial renters tracks fairly consistently with their level of educational attainment. More educated Millennials command higher salaries.
  • Of course certain markets have higher-earners — we already saw that nearly 8 percent of Millennials in San Francisco earn more than $350,000 annually.
  • There are also significant income differences across small and large properties at the same education level. Millennials with college degrees living in small buildings have lower incomes than their similarly-educated counterparts in larger properties.
  • As shown above, Millennial renters in small asset buildings with college or associate degrees earned about $34,000 annually, compared to $43,000 earned by those living in large properties. This difference is even wider at higher levels of education.

Learn more on Alex Chatter.

Upon 1st Anniversary, Arbor LoanExpress Attains New Efficiency & Client Service Milestones for Multifamily Borrowers & Brokers

UNIONDALE, NY (Feb. 14, 2017) – Arbor Realty Trust, Inc. (NYSE:ABR), a real estate investment trust and national direct lender specializing in loan origination and servicing for multifamily, seniors housing, healthcare and other diverse commercial real estate assets, has announced that its Arbor LoanExpress (ALEX) online agency loan origination and processing platform has reached three new efficiency and service milestones upon its one-year anniversary mark. In only one-year’s time, ALEX helped rapidly close 426 loans and process $2.3 billion in loan volume while ultimately saving nearly 24 hours per loan in processing time.

As a Top 10 Fannie Mae DUS® Multifamily Lender for the past decade and Freddie Mac’s Top Multifamily Small Balance Loan provider, efficiency and customer service are at the crux of Arbor’s business and success.

“Leveraging technology advances to deliver a faster and more efficient origination and processing experience is a primary focus and a core part of our business strategy, “ said Ivan Kaufman, Arbor’s President, Chairman and CEO. “In 12 short months, ALEX has delivered an easy, efficient and transparent financing environment for borrowers and brokers alike. We have only scratched the surface of what we intend to deliver to our clients in the near future.”
Within its first year of service to Arbor clients, ALEX has also provided the company with new avenues to business generation across the growing online real estate investment market. As part of this new level of reach within the multifamily market, ALEX’s news blog, ALEX Chatter, has provided multifamily investors exclusive insight and research into the small balance investment market through its partnership with Chandan Economics.

While ease, efficiency, 24/7 loan document management, mobile access and e-signature execution were some of the hallmarks of ALEX’s first year in business, the platform is now working on several additional initiatives. These include integrating ALEX with several significant broker client systems; incorporating a seniors housing financing component; and delivering continual process and experience enhancements that will increase loan processing time savings and ease of use.

About Us
For over 20 years, Uniondale, NY-based Arbor Realty Trust, Inc. (NYSE: ABR) has been helping multifamily and commercial real estate clients achieve their financial goals by focusing on growing long-term relationships and conducting business as not simply another real estate lender, but a partner. We value our clients to such an extent that we are more comfortable calling them partners, and their relationships with Arbor are the foundation of our business.

Founded by Chairman and CEO Ivan Kaufman, Arbor Realty Trust, Inc. is a real estate investment trust and direct lender specializing in loan origination and servicing for multifamily, seniors housing, healthcare and other diverse commercial real estate assets. Arbor is a Top 10 Fannie Mae DUS® Multifamily Lender by volume and a leading Fannie Mae Small Loan lender, a Freddie Mac Multifamily Seller/Servicer and the Top Freddie Mac Small Balance Loan Lender, a Fannie Mae and Freddie Mac Seniors Housing Lender, an FHA Multifamily Accelerated Processing (MAP)/LEAN Lender, a HUD-approved LIHTC Lender as well as a CMBS, Bridge, Mezzanine and Preferred Equity lender, consistently building on its reputation for service, quality and flexibility. With a current servicing portfolio of more than $12 billion, Arbor is a primary commercial loan servicer and special servicer rated by Standard & Poor’s with an Above Average rating. Arbor is also on the Standard & Poor’s Select Servicer List and is a primary commercial loan servicer and loan level special servicer rated by Fitch Ratings. Arbor Realty Trust is externally managed and advised by Arbor Commercial Mortgage, LLC.