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Nov. 14, 2012

Economy Watch: Commercial Mortgage Originations Dip in 3Q

By Dees Stribling, Contributing Editor

Commercial and multifamily mortgage origination volumes dropped by 7 percent during the third quarter of 2012 compared with the same quarter in 2011, according to the Mortgage Bankers Association on Tuesday. Quarter-over-quarter, the drop was even more pronounced: 17 percent lower in 3Q12 than during the second quarter, according to the MBA’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.

The year-over-year decrease in lending volume was driven by decreases in originations for retail and office properties, noted the MBA. The decrease included a 35 percent decline in the dollar volume of loans for retail properties, and a 24 percent decrease for office properties. On the other hand, there was a 4 percent increase for hotel properties; a 19 percent increase for industrial properties; a 19 percent increase in healthcare property loans; and a whopping 30 percent increase in multifamily loans.

Among investor types, the dollar volume of loans for life insurance companies decreased by 32 percent compared with 3Q11. There was an 8 percent increase for commercial bank portfolios and a 30 percent increase for the GSEs. There was no change in volume of loans originated for conduits for CMBS.

“Commercial and multifamily mortgage borrowing slowed in the third quarter,” Jamie Woodwell, MBA’s vice president of CRE research, said in a press statement. “Even though low interest rates continue to make borrowing extremely attractive, a moderate pace of commercial property sales transactions and a continued drop in the volume of commercial mortgages maturing limited the overall amount of commercial mortgage loans originated.”

Small businesses more cheerful, but not much

The National Federation of Independent Business reported on Tuesday that its Small Business Optimism Index rose 0.3 points in October to 93.1. The uptick didn’t seem to indicate a dramatic shift in small business owner sentiment over the course of the month, which was still before the election. Now that that’s over, small business owners could be relieved by the certainty, or conversely, anxious about the fiscal cliff.

One indicator that rose slightly in October in the NFIB’s estimation was the frequency of reported capital outlays in the past six months, up three points to 54 percent. But weak sales are still the reported No. 1 business problem for 22 percent of owners surveyed.

October was another weak job creation month among small businesses, though better than September because of a lessening of terminations, which has the effect of raising the net jobs number. According to the October survey, owners stopped releasing workers. The average change in employment per firm rose to just 0.02 workers—essentially zero.

Wall Street wandered around on Tuesday and ended the day down. The Dow Jones Industrial Average lost 58.9 points, or 0.46 percent, while the S&P 500 and the Nasdaq were down 0.4 percent and 0.7 percent, respectively.