| |
 |
We are conducting an apartment financing survey this week (October 5-9), asking lenders, investors, developers, brokers, and appraisers to tell us what type of apartment financing they are seeing in the market now, and which lenders are making loans. The results will appear in a new Apartment Lender Directory. [Download the survey form]
It's time to look at the availability of financing for apartment investments and new apartment development. We're hearing from developers, brokers, and investors that financing is not available. The last time we heard that was in the early 1990's credit crunch.
But that wasn't exactly true. Financing was available. it's just that developers and investors didn't like the terms. After all, if there really wasn't any financing in 1991 or 1992, then soon after that we'd see development dry up. It did slow down, but it did not disappear. The low point was 1993, when only 1,600 new units began lease-up.
Okay, in defense of those who complain that financing has dried up, our new apartment development forecast expects only 500 new apartment units to open in 2011. That's a low point. But is it simply the result of a lack of financing? We'll see.
The same goes for apartment sales activity. If there is no financing, there wouldn't be many sales. Granted, apartment sales volume in King, Pierce, and Snohomish counties is at an all time low. Only $309 million of 5-unit and larger properties has traded hands so far this year. To put that in perspective, investors bought $3 billion in 2005. But can the drop-off in volume be blamed on a lack of financing?
Another way to look at sales volume is the number of transactions each year. We have tracked 20-unit and larger sales since 1979 (we didn't include 5-19 unit sales until ten years ago). So far this year there have been only 16 sales of 20-unit and larger properties. if you annualize that for the remaining three months, you get an estimate for the year of 22 sales. That would tie 1979 for the fewest number of sales in the past 31 years.
Sales activity did slow down a bit in the early 1990's. But investors still closed more than 40 transactions a year. So, when investors said financing was not available in the early 1990's credit crunch, that wasn't entirely correct. But is it true today?
That's what our lender survey will find out. We will complete the survey and post the results by October 15th. If you would like to participate in the survey, download the survey form and return it to us by October 9, 2009.
Note: Although the report we'll publish from the survey will list active lenders, you don't need to be a lender to participate in the survey. And if you want to provide information anonymously, just tell us. We'll keep any sensitive information confidential.
