Commercial and Multifamily Loans Were Off to Strong Start in 2020 Until Coronavirus ‘Derailed’ Market
MBA's Jamie Woodwell says that investors and lenders are now focusing more on their existing portfolios than new opportunities.
Commercial and multifamily mortgage loan originations nearly matched 2019 levels in the first quarter of 2020, decreasing only 2% compared to the same period the year before, but the coronavirus pandemic appears to have thrown investors off course.
Jamie Woodwell, the Mortgage Bankers Association’s Vice President of Commercial Real Estate Research, said the first-quarter survey showed the beginning of what was expected to be “another strong year,” but investors and lenders are now focusing more on their existing portfolios than new opportunities.
“That strong start has been derailed by the coronavirus and our individual and collective responses to it,” Woodwell said. “Early indications are that low interest rates continue to attract some property refinancing, but that overall transaction activity has fallen given the economic uncertainty stemming from the virus.”
The Mortgage Bankers Association’s survey showed that loan originations for office properties, multifamily housing and healthcare properties increased in the first quarter of 2020 compared to the same period in 2019, but originations for hotels, retail and industrial properties declined.
The dollar value of loans originated for commercial mortgage backed securities increased 14% compared to the same period in 2019, and the value of loans originated for government sponsored enterprises including Fannie Mae and Freddie Mac increased 6%. On the other hand, the value of loans originated for life insurance companies decreased 18%, while commercial bank portfolios saw a 1% decrease.
The 2% overall dip compared to 2019 comes after at least three consecutive years of first-quarter year-over-year increases for commercial and multifamily mortgage loan originations, according to historical data from the Mortgage Bankers Association’s survey. The first quarter of 2019 saw a 12% increase compared to the same period in 2018, according to the association.
Reflecting typical seasonal trends, originations were 40% lower in the first quarter of 2020 compared to the fourth quarter of 2019