The Vue in Minnesota is an example of a new multi-family project coming to the Midwest.
The best news for the multi-family market is this: This market segment remains strong for several reasons, not just one.
Foreclosure numbers remain at unhealthy numbers across the country, with RealtyTrac confirming that foreclosure filings were reported on 610,337 properties in the third quarter of last year, an increase, though slight, of less than 1 percent from the previous quarter. That?s a lot of people who?ve lost their homes; they have to live somewhere.
At the same time, lenders today have tightened the requirements that potential homeowners must meet to qualify for mortgage loans. Real estate columnist Kenneth Harney, writing for the Washington Post, reported early this year that home loans originated for purchase or guarantee by Fannie Mae and Freddie Mac now carry average FICO credit scores in the 760 range. That?s a record-high. Loans insured by the Federal Housing Administration now have average credit scores just above 700.
There was a time when lenders considered FICO scores of 620 to 640 good enough. In fact, that time wasn?t even that long ago ? try the housing boom years of 2004 through 2006.
There are other reasons why people are choosing multi-family living: More people are migrating toward urban centers because these are where most the jobs are today. Single-family housing in big cities remains expensive, so potential homeowners in these urban centers are instead becoming renters.
Then there is the aging of the country. Baby Boomers are getting older, becoming empty-nesters. Many are trading in their single-family homes for multi-family living.
Finally, an interesting point came up during the Commercial Real Estate Forecast Conference held this January in Chicago by Midwest Real Estate News? sister publication Illinois Real Estate Journal. Sam Zell, the famed Chicago real estate mogul and chairman of Equity Group Investments, praised the strength of multi-family housing. And in doing so, he mentioned that younger consumers ? those 34 and under ? are no longer rushing out of college to buy a single-family home.
These buyers, instead, are choosing the flexibility that comes with renting, partly because they?re worried that home values will continue to fall.
As Zell said, this appears to be a prudent move.
?I have no idea why any young person today would want to be tied down with a single-family home,? Zell said during the conference.
Dan Hampton, senior vice president and head of U.S. commercial real estate in the Indianapolis office of BMO Harris Bank N.A., said that he expects multi-family?s strong performance to continue for the foreseeable future.
?Multi-family is certainly one of the advantaged property classes in commercial real estate right now,? Hampton said. ?We have seen a real pick-up in multi-family this year and late last year. We?ve closed acquisitional loans, refinance loans, construction loans for good projects, all in the multi-family market. And we are interested in continuing to look at these loan opportunities.?
What kind of multi-family projects is BMO Harris funding today? What do officials with this bank look for when deciding which projects are worth funding and which should be bypassed?
Not surprisingly, much of this decision, as in most real estate decisions, comes down to location, Hampton said.
?This remains a location business,? Hampton said. ?We look at the location of the multi-family project. We look for demand generators, submarket factors. We look at the equity contribution and, of course, the sponsor quality. We want to work with clients who have more than just a credit-only relationship with us. We want to work with clients who have, preferably, a full-banking relationship with us.?
? Dan Rafter
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Source: http://rejblog.com/2012/02/08/multi-family-in-the-midwest-is-strong-all-over/
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