Total commercial and multifamily borrowing and lending is expected to decline in 2023 to $700 billion, according to an updated baseline forecast from the Mortgage Bankers Association (MBA). This a 5% decrease from the anticipated total of $740 billion last year. Multifamily lending also is forecast to fall to $393 billion this year, an 11% drop from 2022’s expected total of $439 billion.
According to the MBA, it anticipates that borrowing and lending will rebound next year, predicting $887 billion in total commercial real estate lending, with $483 billion in multifamily lending.
“The typical [Federal Open Market Committee] member’s expectations for the federal funds rate at the end of 2023 increased throughout 2022, jumping from 1.6% to 5.1% as of December 2022,” said Jamie Woodwell, MBA’s head of commercial real estate research. “Those shifts in outlook from the Federal Reserve are both a response to changing economic conditions and a cause of change themselves. Commercial real estate markets are not immune to these shifts, and we expect borrowing and lending backed by commercial and multifamily properties to decline again this year.”
Woodwell added that uncertainty and volatility surrounding the economy, interest rates, and property valuations likely will cause instability for the commercial real estate markets well into 2023.
In November, reflecting an anticipated contraction of the multifamily originations market, the Federal Housing Finance Agency announced the 2023 multifamily loan purchase caps for Fannie Mae and Freddie Mac would be $75 billion each for a combined $150 billion to support the multifamily market. These caps are down from the combined $156 billion for 2022.
