Commercial Lending Rebound to Continue Into 2025, MBA Reports
Mortgage Bankers release first forecast for 2025, expecting its gain will be nearly as large as the one it expects for this year.
The Mortgage Bankers Association said it expects the 2024 rebound in commercial lending it has been predicting for months will continue into 2025.
The MBA on Tuesday offered its first 2025 forecast for origination of loans backed by commercial real estate, predicting production will rise 25% to $717 billion in 2025.
The portion backed by multi-family real estate is expected to rise 19% to $404 billion in 2025, while loans backed by other types of real estate are expected to rise 32% to $313 billion.
The MBA raised its 2024 forecast for commercial real estate production 3% overall, after lowering it several times since it put the number at $906 billion in its Feb. 13, 2023 forecast. The MBA also lowered its multi-family estimate for 2023 by 5%.
The MBA now forecasts commercial loan production will reach $576.3 billion in 2024, up 29.7% in 2023, and up from the Oct. 19 forecast of $559 billion for this year.
Multi-family is forecast at $339 billion for 2024, up 25.1% from 2023 and unchanged from its Oct. 19, 2023 forecast. Other loans are expected to rise 37.0% to $237 billion this year.
Total commercial production for 2023 is forecast at $444 billion, down 46% from 2022, and basically unchanged from its Oct. 19, 2023 forecast.
Jamie Woodwell, the MBA’s head of commercial real estate research, said the trend will be up from 2023, but will still not rise to levels seen in 2017.
“2023 is likely to go into the record books as the slowest year for commercial real estate borrowing and lending in roughly a decade,” Woodwell said. “As the markets reset — on interest rates, property values, some property fundamentals and other factors — those volumes should pick up marginally.”
Woodwell said commercial mortgage originations have historically followed property prices, and the uncertainty about the future path of interest rates has contributed to the current slowdown.
“If interest rates and cap rates were to fall, that should help boost values and promote borrowing,” he said. “If they remain higher for longer, that will suppress activity. This uncertainty is a contributing factor in today’s slowdown.”
The MBA reported Jan. 16 that 0.9% of commercial real estate loans were at least 60 days delinquent at Dec. 31, up from 0.5% three months earlier, based on a survey that covers about $2.7 trillion of the $4.6 trillion in commercial real estate loans outstanding at the end of 2023.
Loans backed by office properties drove the increase. Loans backed by multi-family housing had much lower delinquency rates than other types of commercial loans, the MBA said.
Credit unions have fared a little better. NCUA data showed their 60-day delinquency rate was 0.44% as of Sept. 30, up from 0.41% a year earlier.
NCUA data showed credit unions held $143.9 billion in commercial loans backed by real estate as of Sept. 30, up 15.8% from a year earlier.
But like other lenders, credit union loan production has plummeted. Credit unions generated $23.1 billion in commercial loans from January through September, 44% lower than the first nine months of 2022.