Origination activity remains strong, though slowdown looms on the horizon
Despite housing market fatigue in the residential sector, commercial and multifamily mortgage originations jumped 19% annually in the second quarter as solid demand continued to drive lending activity.
Borrowing and lending backed by commercial real estate set another quarterly record, driven by a rise in retail, hotel, and multifamily originations, according to the Mortgage Bankers Association’s new survey.
However, Jamie Woodwell, vice president of commercial real estate research at MBA, pointed out that the pace of increase slowed from the first quarter, increasing 15% quarter over quarter.
“Property owners, investors, and lenders continue to work through broader economic uncertainty that is affecting the space, equity, and debt markets,” Woodwell said.
Year over year, retail increased by 108%, hotels increased by 37%, multifamily increased by 24%, and industrial increased by 3%. Meanwhile, the office sector logged an 11% decrease, and health care dropped by 3%.
Among investor types, the dollar volume of loans originated for depositories skyrocketed by 102% annually, government-sponsored enterprises (GSEs – Fannie Mae and Freddie Mac) were up by 29%, and investor-driven lenders increased by 12%. Commercial Mortgage-Backed Securities (CMBS) fell 57%, and lending for life insurance company portfolios slipped by 5% in the second quarter.
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“MBA is forecasting that borrowing and lending will slow during the second half of the year,” Woodwell stated. “That said, improvements in fundamentals and values in recent years provide significant support to properties with outstanding loans and continued financing opportunities for properties whose cash flows can support debt.”
