New figures reveal that insurance company America International Group (AIG) has increased its lending on apartment mortgages. This move is aimed at cancelling out the effects of volatile hedge fund holdings and the low yields for publicly-traded bonds. It also indicates rising interest in apartment ownership.
As lending standards become stricter and the number of available houses shrinks, creating hurdles for potential homebuyers, the demand for apartments has grown. While rents have risen by 3.8 percent, the U.S. apartment vacancy rate fell to 4.4 percent - close to the low experienced in mid-2015. The third quarter of 2016 saw AIG lend most in apartment loans to those in Massachusetts and California. Its highest concentration is focused on New York.
According to a regulatory filing, loan exposure relating to multi-family properties rose by 20 percent, to $5.2 billion, ending September 30th. AIG explained that it is better positioned to offer home loans because the funds to back insurance policies can be held for years. "We are doing more direct lending, using our ability to take less-liquid assets, where we have done our own underwriting as opposed to buying securitized assets that have been underwritten by someone else," said chief executive Peter Hancock.
Due to the growing trend in apartment ownership, available inventory has dropped significantly, showing that many property buyers who may have been sidelined from the housing market are now finding alternative options for permanent accommodation.
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