MBA Predicts 46% Slump in CRE Lending This Year
Lending is expected to hit $559 billion next year, with multifamily grabbing $339 billion of that total.
Anyone who has wondered if it is worthwhile to ask a bank for a CRE loan probably has good reason to doubt. A new report from the Mortgage Bankers Association (MBA) predicts a 46% slump from $816 billion in 2022 to $442 billion this year in commercial and multifamily mortgage borrowing and lending.
This updated baseline forecast reveals that multifamily lending alone is likely to plummet 41% to $285 billion this year – compared to $480 billion in 2022.
The outlook for 2024 could be rosier, however. The MBA forecast is for commercial real estate lending to hit $559 billion then, with multifamily grabbing $339 billion of that total.
Meanwhile, “the logjam in the commercial real estate markets that began last summer has remained firmly in place,” said Jamie Woodwell, the MBA’s head of commercial real estate research. Woodwell blamed “a marked decline” in demand for new mortgages on uncertain supply and demand dynamics, volatile interest rates and the inability to establish an accurate price for properties because so few transactions are taking place.
A second report issued a day later by the MBA painted a bleak picture of the market. It showed an increase in CRE delinquencies in 3Q 2023 for most sectors – the fourth successive quarterly uptick. “The delinquency rate for loans backed by office properties now exceeds those of loans backed by retail and hotel properties, while the delinquency rates for multifamily and industrial property loans remain below one percent,” Woodwell said.
The MBA analysis shows that 97.3% of outstanding loan balances were current or less than 30 days behind at the end of 3Q 2023. That’s less than the 97.7% recorded at the end of 2Q 2023. By sector, the increase was driven by loans for office properties which saw a jump in delinquency from 4% to 5.1% in the quarter, the MBA noted. There was a 0.1% increase in delinquent retail loans to 5%, but a dip from 5.3% delinquencies for lodging to 4.9%. Multifamily delinquencies also increased from 0.7% to 0.9%. Industrial loan delinquencies fared better, falling from 0.8% to 0.6%.
By capital type, CMBS loans saw the highest failures in repayments, with 4.4% of loan balances delinquent compared to 4.1% in 2Q 2023.