The Mortgage Bankers Association (MBA) is forecasting a decline in commercial and multifamily lending in 2020. According to the MBA, commercial and multifamily mortgage bankers are anticipated to close $395 billion of loans backed by income-producing properties this year, down 34% from 2019’s record volume of $601 billion.
The new MBA forecast expects multifamily lending alone, which includes some loans made by small and midsize banks not captured in the overall total, to decrease 21% to $288 billion this year from last year’s record of $364 billion.
Looking ahead to 2021, the MBA anticipates a slight increase in lending volumes, with activity rising to $407 billion in commercial and multifamily mortgage bankers originations and $305 billion in multifamily lending.
“There remains a great deal of uncertainty about the pandemic and its impacts on the economy and commercial real estate, with significant differences across property types and capital sources,” said Jamie Woodwell, vice president for commercial real estate research at the MBA. “The downturn is putting downward pressure on some property incomes, particularly property types most impacted by the pandemic or with shorter lease terms. With low interest rates and investment yields, property values are likely to hold up better, which should help put a floor under sales and originations volumes this year and next.”
Woodwell added that through the first three quarters of 2020, multifamily sales volume was 41% lower than a year earlier, with multifamily originations down just 17%. “The strong level of refinance activity of multifamily mortgages, particularly into Fannie Mae, Freddie Mac, and Federal Housing Administration (FHA) loans, is lifting overall originations activity from where it might otherwise be, and is driving differences between property types and capital sources. These contrasts are likely to remain pronounced.”
In the third quarter alone, the MBA reported that commercial and multifamily mortgage loan originations were 47% lower compared with a year ago. However, it increased 12% over the second quarter.
“Borrowing and lending backed by commercial and multifamily mortgages remained subdued during the third quarter,” Woodwell said. “Every major property type and capital source recorded a decline compared to last year’s third quarter. Originations backed by industrial and multifamily properties saw smaller declines than other property types, with multifamily lending buoyed by loans made for Fannie Mae, Freddie Mac, and FHA.”
Multifamily properties saw a 31% decrease in lending volumes in the third quarter compared with the third quarter of 2019. However, multifamily properties saw a 4% increase in third quarter originations compared with the second quarter.
