SPECIAL REPORT: MBA Predicts M-F Funding Market Share May Fall Slightly in 2013

By Keat Foong, Executive Editor

San Diego—Mortgage originations for commercial properties will increase by 11 percent in 2013, the Mortgage Bankers Association (MBA) forecasted. The market share of multifamily financing may tick down this year as capital supply to the other commercial real estate sectors make a comeback.

At MBA’s Commercial Real Estate Finance/Multifamily Housing Convention & Expo, MBA released its 2013 mortgage financing outlook. Originations of commercial and multifamily mortgages will grow to $254 billion in 2013, compared to $229 billion in 2012. (In its inaugural financing volume forecast, MBA had predicted the 2012 volume to be $230 billion.)

“Our forecast anticipates Fannie Mae, Freddie Mac and FHA, as well as life insurance companies, will all continue to have strong appetites for making loans, and—coupled with growth in originations for CMBS—the total market will continue to expand,” stated Jamie Woodwell, MBA’s vice president of Commercial Real Estate Research, in a press release.

At a press briefing during the conference, Woodwell predicted that multifamily financing will total about $105 billion in 2012. This financing volume far outstripped expectation, as only $77 billion was originally forecasted for the multifamily sector for the year.

Multifamily financing volume may experience a slight shrinking in 2013 and subsequent years to “a more traditional size” relative to the overall commercial property mortgage market, said Woodwell, during a press briefing held at the conference. Woodwell said multifamily financing had seen its share of the overall commercial property financing market increase due to funding availability and multifamily fundamentals. In 2012, multifamily financing was 46 percent of total commercial property mortgage financing. As mortgage funding for the other sectors are returning a little more strongly, however, “we’ll see more of that traditional balance” between the multifamily and commercial property market shares, said Woodwell.

MBA forecasts GDP to increase to 2.0 in 2013 from 1.8 percent last year, while unemployment rate will fall to 7.6 percent, compared to 8.1 percent for 2012. MBA said the 10-year Treasury yield will rise slightly from 1.8 percent in 2012 to 2.2 percent for 2013. However, actions by the Fed, on which a large part of the interest rate prediction is predicated, could be unpredictable, noted Jay Brinkmann, chief economist and senior vice president of Research and Education.

In the fourth quarter of 2012, MBA reported that commercial and multifamily mortgage originations increased by 49 percent compared to the fourth quarter of 2012. “During the fourth quarter, commercial and multifamily mortgage borrowing and lending hit the highest level since 2007,” stated Woodwell. MBA’s mortgage bankers originations index shows originations for 2012 increased by 24 percent compared to 2011.

The fourth quarter increase in commercial/multifamily lending volume was driven by increases in originations for hotel and office properties, according to MBA. The mortgage financing volume increases, relative to fourth quarter 2011, were 331 percent for hotel properties, 78 percent for office properties, 49 percent for multifamily properties, 46 percent for industrial properties, 5 percent for retail properties and 26 percent for health care properties.

By investor type, the dollar volume of loans in the fourth quarter compared to the same period in 2011 rose by 228 percent for CMBS, 68 percent for commercial bank portfolio loans, 51 percent for GSEs and 18 percent for life insurance companies.