MBA Lowers Forecast for Commercial Loans – Again
Mortgage Bankers finds the persistence of high rates and buyer uncertainty is reducing volume.
The Mortgage Bankers Association has again cut its forecast for commercial loans backed by real estate as interest rates remain persistently high and buyers are uncertain about property values.
The MBA’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations released Tuesday showed overall commercial real estate production in the three months ending June 30 was 53% lower than a year ago and up 23% from the first quarter.
Multi-family originations in the second quarter were 48% lower than a year earlier, but up 37% from the first quarter.
The findings were similar to the results for the nation’s 10 largest credit unions. A CU Times analysis of NCUA data showed the Top 10 generated $842.3 million in commercial real estate loans in the second quarter, down 48% from a year earlier and down 19% from $709.6 million in the first quarter.
Jamie Woodwell, the MBA’s head of commercial real estate research, said commercial lending in the second quarter did pick up from the first quarter but was less than half of the very strong production in 2022’s second quarter.
“Higher interest rates, uncertainty about property values, and questions about some property fundamentals are all contributing to the slowdown,” Woodwell said. “We expect the logjam to begin to break in coming quarters, but the path forward will depend on where interest rates and other aspects of the economy go from here.”
The Aug. 15 quarterly forecast showed decreases in originations for all major property types compared to the second quarter of 2022:
- Health care properties were down 74%;
- Office properties were down 66%;
- Retail properties were down 55%;
- Industrial properties were down 55%; and
- Hotel properties were down 32%.
The Aug. 15 forecast for quarters is based on an index and the MBA provides no dollar values.
In an Aug. 3 forecast for the year, the MBA said it expected originations this year to be $504 billion for all commercial real estate loans and $299 billion for multi-family loans — both down 38% from 2022.
For next year, however, it brightened its forecast. It said it expects total originations to rise 70% to $856 billion for all commercial real estate and 51% to $452 billion for multi-family. Those forecasts showed upward revisions from its last forecast, on May 11, of $829 billion for total originations and $456 billion for multi-family.
The Aug. 3 forecast was the fifth time the MBA has lowered its annual commercial forecast for 2023 since July 2022, when it forecast $872 billion total commercial real estate originations this year. Its forecast on May 11 was $654 billion.
It has lowered its multi-family forecast six times since July 2022, when the MBA expected $454 billion in originations for 2023. The May 11 forecast showed multi-family originations falling 14% from $437 billion in 2022 to $375 billion this year. The Aug. 3 forecast showed a much steeper 38% drop because it revised both the 2022 originations upward to $480 billion, while lowering the 2023 forecast to $299 billion.