Based in Wilmette, IL, John Hofmann directs the Commercial Mortgage Group and oversees capital markets at KeyBank Real Estate Capital. John Hofmann closely monitors trends and market dynamics impacting new developments nationwide.

According to the Home Building Geography Index (HBGI) published by the National Association of Home Builders (NAHB), the single-family home construction downturn may have bottomed out in the second quarter (Q2) of 2023. Released in September 2023, the report notes that the single-family market share across large metro core regions reached 49.8 percent in Q2, representing a record low.

As described by the NAHB chairperson, single-family production across small and large geographic markets will likely register growth as the Federal Reserve completes its tightening cycle and mortgage rates stabilize.

The combination of rising construction costs and high mortgage rates also dampened multifamily market growth. In particular, large metro core counties reported a negative 10.6 percent multifamily production growth rate in Q2 2023. Amplifying this, the multifamily market share in those regions stood at 37.4 percent, nearly five percent less than in Q1 2020.

Counterpoising this, non-metro/micro counties witnessed 26.6 percent growth, with large metro outlying counties and micro counties also on the positive growth side of the ledger. The figure reflects changes in home building geography. Multifamily construction, particularly apartments, has transitioned to lower-density markets, such as suburbs and exurbs. It sets the stage for new growth areas in a dynamic and recovering market.

​John Hofmann is a Wilmette, IL, executive who leads KeyBank Real Estate Capital’s Commercial Mortgage Group and delivers various multifamily borrowing solutions. Alongside his Chicago team, John Hofmann follows regulatory developments impacting the capital markets.

In June 2023, the Federal Housing Administration (FHA) published a Mortgage Letter that raises the threshold from $75 million to $120 million for classifying multifamily loans as large loans. Representing the first such increase since 2014, the action broadens the number of transactions and standard underwriting processes that applicants for FHA Multifamily insurance can employ.

As described by the FHA, it simplifies and makes the multifamily housing development underwriting process less expensive without presenting undue institutional risks. It helps borrowers mitigate the pressures of increased development costs while meeting an urgent nationwide need for a greater stock of rental housing. The action also removes unnecessary barriers to gaining FHA-insured financing for wide-ranging multifamily transactions. The Multifamily Accelerated Processing (MAP) Guide provides an annual review of the threshold, with increases in $5 million increments possibly moving forward.