Commercial, Multifamily Loans Drop Precipitously YoY

According to the Mortgage Bankers Association (MBA) commercial and multifamily loan originations were 49% lower in the third quarter of 2023 compared to the third quarter of 2022—a number which is also down 7% from the second quarter of 2023—according to the MBA’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations. 

“Borrowing backed by commercial real estate properties declined again in the third quarter,” said Jamie Woodwell, MBA’s Head of Commercial Real Estate Research. “Borrowing and lending were down for every property type and capital source from one year ago. However, compared to this year’s second quarter, volumes were more stable, and some sectors—including industrial properties and life company lenders – showed an uptick in volume.” 

“Year-to-date CRE mortgage borrowing has fallen 44%, driven by questions about some properties’ fundamentals, uncertainty about property values, and higher and volatile interest rates,” Woodwell added. “Greater certainty around those conditions is a key prerequisite to breaking the logjam of transaction activity.” 

This drop of 49% also means a decrease in dollar volume when compared year-over-year; in those terms, there was a 76% year-over-year decrease in the dollar volume of loans for health care properties, 52% decrease for hotel properties, 51% decrease for retail properties, 50% decrease for multifamily properties, 49% decrease for office space, and finally a 35% decrease for industrial properties. 

Among the different types of investors, the dollar volume of loans originated for depositories decreased by 73% year-over-year, investor-driven investors activity dropped 55%, and Government Sponsored Enterprises (The GSE’s or Fannie Mae and Freddie Mac) loans dropped by 27%, a 5% decrease for commercial mortgage-backed securities, and a 4% decrease in the dollar volume of life insurance company loans. 

According to the MBA, on a quarterly basis, third quarter originations for health care properties decreased 28% compared to the second quarter of this year. There was a 20% decrease in originations for retail properties, and a 16% decrease for multifamily properties. Originations for hotel properties increased 2%, originations for office properties increased 4%, and originations for industrial properties increased 36%. 

Finally, the MBA reported that among investor types, between the second and third quarter of 2023, the dollar volume of loans for CMBS decreased 21%, loans for depositories decreased 19%, originations for investor-driven lenders decreased 13%, and loans for GSEs decreased 4%. The dollar volume of loans for life insurance companies increased by 18%. 

Click here to read the MBA’s most recent report here; historical reports can be found here.