MBA Lowers Commercial Real Estate Forecasts
The forecasted drop for this year becomes deeper and forecasted increase for next year becomes shallower.
The Mortgage Bankers Association released a revised forecast that shows total commercial real estate lending falling more steeply this year than it expected three months ago, and rising more modestly next year.
Thursday’s forecast predicted total lending to fall 20% to $654 billion in 2023, compared with Feb. 13’s forecast of it falling 16% to $684 billion this year. For 2024, the MBA predicted total lending will rise 27% to $684 billion, down from Feb. 13’s forecast of it rising 33% to $906 billion next year.
The lower forecasts followed the MBA’s release Tuesday of estimates showing commercial loan originations in the first quarter falling far below levels of a year earlier and the fourth quarter of 2022. A sample of 29 large credit unions showed smaller first-quarter drops in production.
The Fed’s quarterly survey of bank lenders released Monday showed tightening of commercial credit in the quarter.
Jamie Woodwell, the MBA’s head of commercial real estate research, said the slowdown in commercial real estate financing began in mid-2022 because of “higher interest rates, uncertainty about property values and questions about the outlook for the cash flows of some properties.”
“That slowdown is likely to persist through much of this year as investors, lenders and others look for greater transparency into the markets,” Woodwell said. “We expect maturing loans to begin to break the logjam and provide greater clarity as this year goes on. However, it may take until 2025 for volumes to get back to previous years’ levels.”
The MBA on Thursday also lowered its multi-family estimates and forecasts for last year, this year and next year.
The MBA said it expects multi-family, which is included in the total, to fall 14% to $375 billion in 2023, compared with its Feb. 13 forecast of a 16% drop to $384 billion. Next year it said it expects multi-family to rise 22% to $456 billion, down from its Feb. 13 forecast that it would rise 27% to $486 billion.
In the Fed’s lender survey, most banks reported weaker demand for loans secured by nonfarm nonresidential properties, construction and land development loans, and loans secured by multi-family properties.
The MBA’s Quarterly Survey of Commercial/Multi-family Mortgage Bankers Originations found first-quarter production was 56% lower than a year earlier and 42% lower than in the fourth quarter.
CU Times’ sample of 29 large credit unions found commercial real estate production fell 17% from a year ago and 15% from the fourth quarter.