Bank Failures Impact On Multifamily Real Estate
Construction loans were already more difficult to get but with the failure of SVB, Signature Bank, and First Republic experts are projecting a significant impact on the starts of new apartment buildings.
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Although local and regional banks held only 10 - 20% of multifamily loans, these failures have created a ripple effect that is making construction debt harder to get.
Ric Campo, CEO of Houston REIT Camden, expects to see a 60% reduction in starts due to banking issues.
These banking failures have made lenders readjust their risk tolerance for development deals, which have already resulted in major builders seeing financing fall through for residential projects.
Part of banks readjusting their tolerance has to do with the amount already invested in the multifamily space. Since 2020 banks lent a lot of money to apartment development projects that were projecting to sell. But with markets slowing and builders not being able to offload their projects like they initially planned, banks are forced to carry these loans for longer - increasing their exposure to this sector more than they planned.