The Mortgage Bankers Association (MBA) has updated its forecast on total commercial and multifamily mortgage borrowing and lending for 2023 and is now predicting this activity sector will end the year at $504 billion, a 38% decline from 2022’s total of $816 billion.
Multifamily lending alone (which is included in the total figures) is expected to drop to $299 billion in 2023, down 38% from the 2022 total of $480 billion. However, MBA is also predicting a 2024 rebound with $856 billion in total commercial real estate lending and $452 billion of that total in multifamily lending.
“Higher and volatile interest rates, uncertainty about property values, and questions about some property fundamentals have led to an impasse in property sales and mortgage originations activity this year,” said Jamie Woodwell, MBA’s head of commercial real estate research. “Our baseline economic forecast anticipates that interest rates will moderate over the next year and half, helping to break the current logjam in transaction activity and bringing relief to financing costs and property valuations.”
“One caveat is that different interest rate paths would lead to different forecast outcomes,” Woodwell added. “Commercial mortgage originations have historically followed property prices – with increases in values pushing mortgage borrowing and lending volumes higher and declines pulling them lower. If interest rates and cap rates fall, as we anticipate, that should help boost values and promote borrowing. If they remain higher for longer, that will suppress activity. The uncertainty about future interest rate paths is a contributing factor to today’s slowdown.”