The Mortgage Bankers Association reduced its outlook for multifamily lending this year by $9 billion as uncertainty in the U.S. economy will affect deals in the entire commercial sector.
But the organization did increase its 2022 estimates of multifamily originations by $20 billion compared with
The forecast is predicated on a weaker economy at the start of this year. But rates should stabilize and the economy is expected to improve as 2023 progresses.
"Given changes in interest rates and investment yields over the last year, new deals and loans are sizing differently than in previous years," said Jamie Woodwell, head of commercial real estate research, in a press release from the MBA Commercial/Multifamily Finance Convention. "These new changes will take time for buyers and sellers to digest, and we expect the logjam to suppress volumes this year."
Woodwell now projects $384 billion in multifamily originations in 2023, down 16% from an estimated $459 billion produced last year. In January, the forecast called for $393 billion in these loans, a decline of 11% from the then-expected 2022 originations of $439 billion.
For 2024, the MBA increased its outlook to $486 billion, an increase of $3 billion from January and pushing it slightly closer to
This year's commercial and multifamily lending activity will be affected by maturing loans and outstanding adjustable rate mortgages, Woodwell said.
However, multifamily loans make up a smaller share of loans coming due this year compared with other types of commercial mortgages. When a loan matures, most borrowers will seek to roll the property over into a new mortgage.
Only $13.9 billion or 2% by outstanding balance of multifamily and health care property loans held or guaranteed by government-sponsored enterprises Fannie Mae and Freddie Mac or by government agencies Federal Housing Administration and Ginnie Mae, will mature in 2023, the MBA said.
By property type, 5% of multifamily mortgages held by non-banks — which besides the above groups includes life insurers and securitization trusts — should reach their due date this year.
"Given current dislocations in the market, loan maturities will be a key mechanism that will force adjustments to changes in interest rates and property values since those loans were originally made," Woodwell said.
Meanwhile, data gathered so far indicate that multifamily and commercial lending during the fourth quarter of 2022 broke traditional patterns and fell from the previous three months as well as the same quarter in 2021.
"The last quarter of the year typically sees the highest volumes, but the chill caused by rising interest rates, questions about property valuations, and increased economic uncertainty made the fourth quarter of 2022 the weakest of the year" for all property types, Woodwell said.
Multifamily originations declined 23% from the third quarter and 54% from the prior year.
Fannie Mae and Freddie Mac combined originated
As it gathers more information, the MBA will be updating its data when it releases its final report for 2022. Preliminary data indicates multifamily mortgage lending fell by 11% in 2022 compared with 2021.
