- Multifamily lending is expected to drop 16% year over year to $384 billion in 2023, according to the Mortgage Bankers Association. In 2024, it projects originations to snap back, hitting $486 billion.
- As originations slump, $74.6 billion (5%) of the $1.4 trillion non-bank multifamily mortgages held by non-bank lenders and investors will mature in 2023, according to the MBA. Still, multifamily trails other property types in the number of loans maturing this year.
- In 2022, multifamily borrowing came in at $459 billion. In the year's final three months, multifamily originations fell 52% YOY and 23% from the third quarter.
Some of the major multifamily lenders have very little debt coming due this year. Two percent ($13.9 billion) of the outstanding balance of multifamily and healthcare mortgages, held or guaranteed by Fannie Mae, Freddie Mac, Federal Housing Administration and Ginnie Mae will mature in 2023. Life insurers only have $42.2 billion, or 7%, of their commercial mortgage balances coming due this year.
Other lenders will face many more maturities across their commercial real estate portfolios this year. Twenty-two percent ($163.3 billion) of the outstanding balance of mortgages in CMBS, CLOs or other ABS will come due this year. In addition, 26%, or $111.8 billion, (26 percent) of the mortgages held by credit companies, in warehouse or by other lenders will mature in 2023.
“Commercial and multifamily mortgages tend to be relatively long-lived in nature. Only one-in-eight dollars of non-bank-held CRE loans will be maturing this year,” said Jamie Woodwell, MBA’s head of commercial real estate research, in a press release. “Some property types, in particular hotels, motels and offices, have higher shares of their debt coming due in the near term, while others, such as multifamily, have lower shares.”
Woodwell expects economic weakness at the start of 2023 but improvement as the year progresses. "Given changes in interest rates and investment yields over the last year, new deals and loans are sizing differently than in previous years,” he said. “These new changes will take time for buyers and sellers to digest, and we expect the logjam to suppress volumes this year."
Lending volumes will be constrained because 2023 will be a slower year for transactions. Yonah Sturmwind, manager of specialty originations at Chicago-based Alliant Credit Union, also thinks 2023 is going to have lower volumes than 2022.
However, once the Federal Reserve sends clear signals on interest rates and fears of a deep recession subside, Sturmwind thinks things could stabilize, and volumes could increase due to buyers and sellers having more clarity to transact. This will likely lead to increased volume in the second half of the year and into 2024.
“A lot of people don’t necessarily think rates need to come back down for transactional activity to come back again, but there has to be some level of certainty about where rates are,” Sturmwind said. “Toward the latter part of the year, there is hope that it will happen again.”
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