An updated 2023 Mortgage Bankers Association (MBA) baseline forecast maintains total commercial and multifamily mortgage borrowing and lending is expected to fall to $504 billion this year.
“Higher and volatile interest rates, uncertainty about property values, and questions about some property fundamentals have led to an impasse in property sales and mortgage originations activity this year,” MBA Head of Commercial Real Estate Research Jamie Woodwell said. “Our baseline economic forecast anticipates that interest rates will moderate over the next year and half, helping to break the current logjam in transaction activity and bringing relief to financing costs and property valuations.”
The projection represents a 38 percent decline from 2022’s total of $816 billion. Multifamily lending alone is expected to fall to $299 billion in 2023 – a 38 percent decline from last year’s total of $480 billion.
Additionally, the MBA anticipates borrowing and lending will rebound in 2024 to $856 billion in total commercial real estate lending, with $452 billion of that total in multifamily lending.
“One caveat is that different interest rate paths would lead to different forecast outcomes,” Woodwell said. “Commercial mortgage originations have historically followed property prices – with increases in values pushing mortgage borrowing and lending volumes higher and declines pulling them lower.”
According to Woodwell, if interest rates and cap rates fall as anticipated, that should help boost values and promote borrowing.
“If they remain higher for longer, that will suppress activity,” he said.