Small Multifamily Lending Volume Moves Steadily Higher

Small multifamily lending activity rose during the first half of 2026. According to the latest Small Multifamily Investment Trends Report from Arbor Realty Trust and Chandan Economics, originations on loans with original balances between $1 million and $9 million reached an annualized pace of $71.6 billion through the second quarter (Chart 1). At this pace, originations are running 2.8% above the $69.6 billion total for 2025, placing small multifamily on pace for a third consecutive annual increase.

Lending Volume Gained Ground as Market Stabilized

The improvement in small multifamily lending was consistent with trends across multifamily real estate. According to the Mortgage Bankers Association, multifamily originations were 8% higher in the second quarter of 2026 than one year earlier.

Refinancing remains an important source of momentum for small multifamily. In total, it accounted for 65.0% (or roughly two-thirds) of all second-quarter lending volume, as borrowers continued to address upcoming loan maturities and recapitalization needs. Although refinancing activity slowed this quarter, it remained the largest share of small multifamily originations.

Greater stability in property valuations has also improved lending conditions by providing a more stable basis for underwriting. Since the first quarter of 2024, small multifamily asset prices have remained within a relatively tight range, oscillating by approximately 4% from low to high and reducing uncertainty around property values.

According to the Federal Reserve’s July 2026 Senior Loan Officer Opinion Survey on Bank Lending Practices, multifamily lending standards eased modestly during the second quarter. Meanwhile, borrower demand softened as interest rates rose during the quarter, with the net share of banks reporting a shift in demand from a 3.3% increase to a 3.8% decrease.

Outlook

Together, recent trends point to a lending market that is improving at a measured and sustainable pace. Upcoming maturities, greater price stability, and gradually improving credit availability should continue to support originations activity. However, elevated financing costs make steady growth more likely than a sharp acceleration.

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