Multifamily mortgage volume likely to drop 11% in 2023

Multifamily mortgage originations are expected to fall by 11% year-over-year in 2023 as the entire commercial real estate sector is not immune to the same economic instability that affects single-family lending, the Mortgage Bankers Association said.

The organization predicts $393 billion of multifamily lending volume this year, down from a projected total of $439 billion for 2022. In 2021, multifamily mortgage volume totaled a record $487.3 billion, according to the MBA's final figures released this past August.

Combined multifamily and commercial real estate lending activity is expected to drop 5% to $700 billion from $740 billion in 2022.

The "typical" Federal Open Market Committee member expects the Fed Funds rate to now end 2023 at 5.1%, which reflects their views on the nation's deteriorating economic conditions, said Jamie Woodwell, the MBA's head of commercial real estate research.

"Commercial real estate markets are not immune to these shifts, and we expect borrowing and lending backed by commercial and multifamily properties to decline again this year," Woodwell said in a press release. "Uncertainty and volatility around the paths of the economy, interest rates, and property valuations will likely continue to cause instability for commercial real estate markets well into this year."

For 2024, the MBA is expecting a rebound in multifamily lending activity, to $483 billion, approaching the 2021 record. Total commercial mortgage volume is predicted to reach $887 billion.

Meanwhile, the Federal Housing Finance Agency released its 2023 scorecard for Fannie Mae and Freddie Mac, confirming the previously announced reduction in each company's multifamily lending cap to $75 billion — for a total of $150 billion — from $78 billion in 2022. The scorecard also covers single-family homeownership goals for the government-sponsored enterprises and the Common Securitization Solutions joint venture.

"The annual scorecard is an important tool for ensuring that the Enterprises operate in a safe and sound manner and fulfill their mission requirements," said FHFA Director Sandra Thompson in a press release. "The 2023 Scorecard builds on the progress made in 2022 to strengthen the Enterprises' capital position while advancing equitable and sustainable access to homeownership and rental housing."

The government-sponsored enterprises new multifamily purchases limits include an expanded focus on workforce/moderate income housing.

"FHFA anticipates the $75 billion cap to be appropriate given current market forecasts; however, FHFA will continue to review its estimates of market size and mission-driven minimum requirements throughout the year," the appendix to the scorecard said, reiterating prior statements. "To prevent market disruption, if FHFA determines that the actual size of the 2023 market is smaller than was initially projected, FHFA will not reduce the cap."