How to Be Prepared for Multifamily Distressed Assets in 2024

Though there is recent optimism for an improving multifamily market in 2024, there is still reason for concern about a potential wave of distressed assets coming due.
By: Winston Rowe and Associates
 
TAMPA, Fla. - Dec. 26, 2023 - PRLog -- US banks could get slammed with another $160 billion in losses as commercial real estate faces its biggest crash since 2008.

Currently, banks are doing whatever they can to avoid taking the keys back on multifamily assets, while special servicing groups and loan workout groups are bracing themselves for a potential influx of troubled loans.

Banks are focusing on pre-foreclosure due diligence is notably more involved than what is typically done during loan origination.

Current multifamily borrowers are finding it difficult to refinance their commercial loans due to the extra scrutiny forcing borrowers into the secondary market non-bank private capital markets.

With mortgage rates above 7.5%, the multifamily segment is witnessing a resurgence of demand for apartments after slowing down for nearly a year.

The net absorption over the last 12 months has risen significantly by 33% compared to the preceding year.

This has encouraged construction firms to increase unit deliveries by 17% compared to the same time frame a year earlier.

Challenges like overbuilding and the resistance of the sector to immediate change have pushed vacancy rates to an unprecedented 7%, subsequently reducing rent growth to 0.8%.

The multifamily sector is anticipated to remain above the pre-pandemic levels, driven by favorable demographics and a robust job market fostering household establishment.

However, most multifamily investors are still finding it difficult to continue their existing banking relationships. This is due to the possible pending recession and future job layoffs combined with increasing inflation and property tax increases in most markets.

Winston Rowe and Associates a national multifamily financing firm has prepared this article, they can be contacted at https://www.winstonrowe.com or give them a call at 248-246-2243.

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Winston Rowe and Associates
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(248) 246-2243
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Tags:Real Estate
Industry:Real Estate
Location:Tampa - Florida - United States
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