MBA Lowers Commercial Forecasts Through 2025
Production of loans backed by multifamily housing and other commercial real estate to rise at a slower rate this year and next.
The Mortgage Bankers Association on Thursday lowered its forecasts for total commercial real estate production this year and next, but both years will still be significantly better than 2023.
MBA’s updated baseline forecast cuts its forecasts for total commercial real estate production for 2024 by 6% and 2025 by 7%.
The new forecast predicts total lending to rise 26% to $539 billion in 2024, and rise 23% to $665 billion in 2025. MBA’s April 23 forecast expected total originations to rise 34% to $576 billion this year and rise 24% to $717 billion in 2025.
There is no forecast for credit unions, but their performance in the first half of this year has been worse than the rest of the market. Credit unions represent only about 2% to 3% of total commercial real estate production.
Jamie Woodwell, MBA’s head of commercial real estate research, said the worst is probably behind us.
“The recent moderation in interest rates, coupled with the large volume of loans maturing in coming quarters, should prompt an uptick in mortgage borrowing from the low levels we’ve seen over the last two years,” Woodwell said. “The exact timing of the bounce-back will depend on how quickly property owners jump on long-term interest rates that are down significantly from where they were a year ago.”
Woodwell said commercial mortgage originations have historically followed property prices.
“The uncertainty about the future path of interest rates has been a contributing factor to the current slowdown — with many investors holding off selling or refinancing a property in the hope of lower rates,” he said. “With longer term rates now lower, many of those players are likely to take action. Investors looking to shorter-term financing can also take solace in signs from the Federal Reserve that they will soon begin bringing down the short end of the curve.”
For loans backed by mutli-family housing, MBA has lowered forecasts this month for 2023 through 2025.
An Aug. 15 report lowered the 2023 forecast by 7%, showing lenders produced $246 billion in multifamily loans, down 49% from 2022. Thursday’s report extends the downward revisions to 2024 and 2025 for multi-family loans. The heaviest revision was this year’s forecast being lowered by 12%.
Multi-family production is now expected to rise 21% to $297 billion in 2024, and then rise 31% to $390 billion in 2025. Loans backed by other types of real estate are expected to rise 32% from $183 billion in 2023 to $242 billion in 2024, and rise 14% to $275 billion in 2025.
NCUA data retrieved from Callahan’s Peer Suite shows credit unions produced $36.1 billion in commercial real estate in 2023, down 38% from 2022. Originations fell 46% to $6.4 billion for multifamily and fell 35% to $29.7 billion for other commercial real estate.
Credit unions produced $9.2 billion in commercial real estate loans in the second quarter, down 3.7% from a year earlier and up 29% from the first quarter.
MBA’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations showed total commercial real estate production in the second quarter was 3% higher than a year earlier and 27% higher than the first quarter.