MBA: Commercial Loans to Drop 46% in 2023

WASHINGTON, D.C. – Total commercial and multifamily mortgage borrowing and lending is expected to fall to $442 billion this year – a 46% decline from 2022’s total of $816 billion, according to an updated baseline forecast released by the Mortgage Bankers Association (MBA).

“The logjam in the commercial real estate markets that began last summer has remained firmly in place,” says Jamie Woodwell, MBA’s head of Commercial Real Estate Research. “Questions about supply and demand dynamics for some properties, the rise and volatility in interest rates, and the low number of transactions and coinciding lack of price discovery have all contributed to a marked decline in demand for new mortgages.

“Unfortunately, those and other factors will likely continue to exert downward pressure on borrowing and lending volumes in the coming quarters.”

MBA says multifamily lending alone – included in the total figures – is expected to drop to $285 billion this year – a 41% decline year-to-year decline from $480 billion.

However, MBA anticipates an increase in 2024. It predicts borrowing and lending next year will increase to $559 billion in total commercial real estate lending, with $339 billion of that total in multifamily lending.

“Commercial mortgage originations have historically followed property prices, and the uncertainty about the future path of interest rates has been a contributing factor to the current slowdown,” says Woodwell. “If interest rates and cap rates were to fall, that should help boost values and promote borrowing. If they remain higher for longer, as is increasingly likely, that will suppress activity. This uncertainty is a contributing factor in today’s slowdown.”

For additional commentary, visit MBA’s Commercial/Multifamily Market Intelligence Blog.

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