A report from the Mortgage Bankers’ Association (MBA) says that originations of multifamily mortgages in Q1 2024 were down 7 percent year-over-year. Originations of all commercial mortgages as a single asset class fell 23 percent year-over-year.
Commercial mortgage originations trend lower
The first chart, below, shows the MBA’s quarterly origination volume indexes since Q1 2018 for both all commercial mortgages as a single asset class and for multifamily mortgages. The indexes are reported relative to the year 2001, with the average quarterly volume in that year defined as a value of 100.
The usual pattern of mortgage origination volume is for volume to increase quarter-by-quarter through the year with Q1 mortgage origination volume declining from the level in Q4 of the previous year. While this year’s 29 percent decline in origination volume from Q4 is in the range of what is typically seen, the decline from the Q1 volume of the year before is unusual. In fact, the reported mortgage origination volume in Q1 2024 is the lowest level for a first quarter since 2016.
The report covers originations for 5 other commercial property categories. They are office, retail, industrial, hotel and health care. Mortgage originations for industrial and for hotel properties were up year-over-year. Industrial mortgage originations rose 63 percent year-over-year and 12 percent quarter-over-quarter. Industrial was the only commercial property category where mortgage originations rose quarter-over-quarter. Hotel originations rose 8 percent year-over-year but fell 37 percent quarter-over-quarter.
Mortgage originations for office property fell 21 percent year-over-year and 3 percent quarter-over-quarter. Retail property originations fell 31 percent year-over-year and 49 percent quarter-over-quarter. Mortgage originations for health care properties fell 22 percent year-over-year and 56 percent quarter-over-quarter.
Who’s lending
The MBA report also includes data on the sources of the commercial mortgages being originated. However, this section of the report does not break out multifamily mortgages from lending on other types of commercial real estate.
The report provides data on five categories of lenders: commercial mortgage-backed securities (CMBS) and conduits, depositories (aka commercial banks and savings and loans), life insurance companies, the government sponsored entities (GSEs), Fannie Mae and Freddie Mac, and investor-driven lenders such as REITs and specialty finance companies. The index values are quoted relative to the average quarterly origination volumes in the year 2001. The index values of different originators cannot be used to compare their absolute levels of mortgage originations since their origination levels in the baseline year of 2001 were different.
To gain insight into the absolute levels of funding provided by the different classes of originators, readers should look to the MBA’s report on mortgage debt outstanding. However, the origination index values can be compared to see which classes of originators are growing their business and which are not.
The final chart shows the history of commercial mortgage origination volume indexes since Q1 2018 by class of lender. It shows that commercial mortgage originations were lower for 4 of the 5 classes of lenders in Q1 2024.
Compared to Q4 2023, CMBS and conduits was the only lender category whose origination volume rose in Q1. CMBS originations rose 57 percent quarter-over-quarter.
Investor-driven lenders had the smallest relative decline in the quarter, with originations falling 18 percent. The GSEs, who hold 48 percent of multifamily mortgages, saw their originations fall by 30 percent compared to Q4 2023. Depositories, who hold 29 percent of multifamily mortgages, reduced their originations 36 percent quarter-over-quarter. Life insurers, who hold 11 percent of multifamily mortgages, lowered their originations by 37 percent compared to Q4 2023.
On a year-over-year basis, commercial mortgage originations were up 93 percent for CMBS and conduit sources, 41 percent for investor-driven lenders and 35 percent for life insurance companies. Issuance fell 17 percent for GSEs and 41 percent for depositaries compared to Q1 2023.
The full report from the MBA includes additional information on lending for other commercial property types. It can be found here.
