Multifamily Lending in 2025: Seizing Opportunities and Overcoming Risk
As 2025 begins, multifamily lending presents a blend of opportunities and challenges shaped by shifting economic conditions. According to NewPoint's Mike Ortlip, while 2024 brought hurdles, including subdued acquisition activity and construction delays, the year ahead offers potential for lenders and developers willing to adapt strategies and focus on market-specific needs.
Building on 2024, A Year of Resilience
Multifamily lending in 2024 showcased its resilience amid fluctuating Treasury yields, depressed rents, and rising operating expenses. Despite these headwinds, NewPoint Real Estate Capital surpassed $1 billion in volume with both Fannie Mae and Freddie Mac. Borrowers often delayed transitioning from construction loans to permanent financing, citing income softness, increasing operating costs (led by taxes and insurance premiums), and decreasing loan proceeds. Yet, refinancing seasoned assets progressed steadily, buoyed by stable property fundamentals and aligned lender criteria. Similar patterns are expected in 2025, however slowing deliveries should lay a strong foundation for growth in the second half of 2025.
A Positive Outlook for 2025
With SOFR trending downward and Treasury rates anticipated to stabilize between 4.40% and 4.80%, plus GSEs offering $146 billion in combined lending capacity, 2025 provides a favorable environment for multifamily lending. Debt funds, CMBS lenders, and insurance companies have capital and appetite, and banks are looking more favorably at CRE. These conditions are expected to support permanent and stabilization bridge lending, as well as stabilized and value-add acquisitions. Aging multifamily assets with deferred maintenance represent a significant opportunity for investors aiming to create value through asset refreshes and targeted updates, particularly given the slowdown in new starts.
Addressing Persistent Challenges
Despite lending optimism, several challenges remain. Construction lending faces constraints due to elevated material costs, labor shortages, (appropriately) cautious underwriting practices, and returns that don’t pencil. Developers must assess local market conditions carefully to mitigate risks, particularly in oversupplied areas. Additionally, rising insurance premiums and potential tax increases highlight the importance of precise financial planning.
Hot Regions and Asset Classes
This year, markets supported by robust job and population growth and favorable tax policies, particularly those with limited deliveries, remain attractive for multifamily investment. In addition to conventional multifamily, workforce housing, build-to-rent (BTR), affordable housing, and seniors housing also attract lenders and present significant upside for savvy investors. Rising homeownership costs and demographic shifts will continue to fuel demand for these assets, creating new avenues for lenders to offer tailored financing solutions.
Borrowers looking to capitalize their real estate projects in 2025 should clearly evaluate their assets’ cash flows and align with experienced lenders. Local market factors—such as population growth trends or potential oversupply in specific urban cores—should also inform their development and financing strategies. By embracing adaptive approaches, multifamily stakeholders can confidently weather the risks and achieve success in the year ahead.
Mike Ortlip is a Senior Managing Director on the NewPoint originations team, where he focuses on providing financing solutions to commercial real estate owners on a national basis through NewPoint’s Agency, FHA/HUD, Proprietary and third-party loan programs. NewPoint is a trusted commercial real estate finance leader, delivering innovative and impactful solutions for housing projects.