MBA: Commercial Real Estate Falls in Q3
MBA report shows originations running near the lows of early 2020, but a relatively small drop from Q2.
The Mortgage Bankers Association said third-quarter commercial loan production fell again in the third quarter, approaching levels not seen since the start of the COVID-19 pandemic.
The MBA’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations released Tuesday showed volume for all lenders in the three months ending Sept. 30 was 49% lower than a year earlier and 6% lower than the second quarter.
Production has generally been falling since hitting a peak in 2021’s fourth quarter.
Jamie Woodwell, the MBA’s head of commercial real estate research, said lending fell for every property type and capital source from one year ago.
“However, compared to this year’s second quarter, volumes were more stable, and some sectors – including industrial properties and life company lenders – showed an uptick in volume,” he said.
Third-quarter data for all credit unions won’t be available from the NCUA until early December. But a CU Times analysis of NCUA Call Reports for the 10 largest credit unions showed commercial loan production has been diminishing for the past year. Top 10 production was $445.7 million in the third quarter, down 82% from a year earlier and down 50% from the second quarter.
Data for the first half for all credit unions showed commercial real estate production was down 43% from the first half of 2022.
Woodwell said commercial real estate for all lenders for the first nine months of the year was down by a similar amount from a year earlier: 44% “driven by questions about some properties’ fundamentals, uncertainty about property values, and higher and volatile interest rates. Greater certainty around those conditions is a key prerequisite to breaking the logjam of transaction activity.”
The MBA’s survey showed multi-family production also began dropping after a fourth-quarter 2021 peak, and this year has been running below 2020 levels. Third-quarter originations were down 50% from a year earlier and down 18% from the second quarter.
The pattern through June has been similar at credit unions. First-half originations were 50% lower than a year earlier for multi-family and 40% lower all other real-estate-backed commercial loans.
The MBA’s quarterly originations report is based on an index; it also publishes a forecast each quarter for full-year production that uses dollar values.
The MBA’s Oct. 19 forecast said it expects total commercial real estate loan production to fall 46% to $442 billion this year, and rise 27% to $559 billion in 2024.