It’s that time again when everyone starts looking back on the year as it comes to a close, but it’s also the time to look ahead to the new year. We already know 2015 will bring a slew of new developments to the New York City skyline, and right on trend with that forecast, Bloomberg has reported that construction loans are up 24 percent in the city.
On-the-rise neighborhoods like Bed-Stuy and Harlem are being aided by the construction loan boom, especially for the renovation of multi-family buildings. The loans, often well over $1 million, are appealing for gentrifying areas because they usually require borrowers to only begin making interest payments once the renovation is complete. For example, a Clinton Hill resident secured a $800,000 construction loan to renovate a century-old multi-family brownstone and estimates that the value of the home will more than double to at least $2.2 million after the renovation.
During the first six months of 2014, “non-government construction loans in the U.S. to renovate two-to-four unit buildings increased 43 percent to 1,885” compared with 2012. In the same period, the number of loans in the New York metro area rose 24 percent to 233. Many of the loans in the city were in still-gentrifying brownstone neighborhoods in Brooklyn, including Bed Stuy, Crown Heights, and Bushwick. In the third quarter of 2014, the median home prices in these areas rose 86 percent to $1.85 compared with 2013. And since the median rent in Brooklyn increased almost 6 percent to $2,858 in October, borrowers are relying on that income to help with mortgage payments. In terms of single-family homes, the Wall Street Journal forecasts a 21 percent gain in construction starts. So, it looks like we’re going to have plenty to talk about in the coming year.