Commercial/Multifamily Borrowing Up 21% Year-Over-Year

Real Estate In-Depth | November 2017

WASHINGTON— According to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations released on Nov. 9, third quarter 2017 commercial and multifamily mortgage loan originations were 21% higher than during the same period last year and 8% higher than the second quarter of 2017.

“Borrowing and lending associated with commercial and multifamily real estate increased again in the third quarter, even as sales transaction volume slowed,” said Jamie Woodwell, MBA vice president of commercial real estate research. “Most property types and capital sources saw stronger lending activity than a year earlier, supported by solid property fundamentals and continued property value appreciation.”

A rise in originations for hotel and health care properties led the overall increase in commercial/multifamily lending volumes when compared to the third quarter of 2016. The third quarter saw a 116% year-over-year increase in the dollar volume of loans for hotel properties, a 97% increase for health care properties, a 20% increase for industrial properties, a 15% increase for multifamily properties, an 8% increase in office property loans and an 8% decrease in retail property loans.

Among investor types, the dollar volume of loans originated for Commercial Mortgage Backed Securities (CMBS) loans increased by 42% year-over-year. There was a 22% year-over-year increase for Government Sponsored Enterprises (GSEs – Fannie Mae and Freddie Mac) loans, a 21% increase in dollar volume of commercial bank portfolio loans, and a 2% decrease in the life insurance company loans.

Third Quarter Originations Up 8% From Second Quarter 2017

Third quarter 2017 originations for health care properties increased 120% compared to the second quarter 2017. There was a 12% increase in originations for multifamily properties, a 10% increase for retail properties, a 6% increase for hotel properties, a 4% decrease for office properties, and a 25% decrease for industrial properties from the second quarter 2017.

Among investor types, between the second and third quarter of 2017, the dollar volume of loans for GSEs increased 31%, loans for commercial bank portfolios increased 15%, originations for CMBS increased 4% and loans for life insurance companies decreased by 4%.

Residential Applications Flat

A day earlier, the MBA reported that residential mortgage applications remained unchanged from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 3, 2017.

The Market Composite Index, a measure of mortgage loan application volume, remained unchanged on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1% compared with the previous week. The Refinance Index decreased 1% from the previous week. The seasonally adjusted Purchase Index increased 1% from one week earlier. The unadjusted Purchase Index decreased 2% compared with the previous week and was 9% higher than the same week one year ago.

The refinance share of mortgage activity increased to 49.0% of total applications from 48.7% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.6% of total applications.