Washington D.C.–There is a further decline in origination volume while multifamily mortgage debt outstanding remained relatively stable, according to the Mortgage Bankers Association’s (MBA) Commercial Real Estate/Multifamily Finance Quarterly Data Book for the fourth quarter of 2008. Though economic pressures such as job losses and the decline in retail spending will continue to curtail originations and to raise the pressure on outstanding mortgages, expectations for the commercial mortgage market have been set so low that it may be hard to under-perform them, according to MBA’s analysis. “Moderate amounts of new construction coming online, added to a significant pull-back in demand for space, has led to a major recalibration in the rental and leasing markets,” according to the report. After years of strong rent and occupancy growth, 2008, and the fourth quarter in particular, saw declines across all the major property types. Thus far, changes in asking rents have been relatively modest –one percent year-over-year drop for apartments.But changes in apartment vacancy rates have been more dramatic, climbing from 6.0 to 7.0 percent.During the fourth quarter, only $17 billion of major apartment, industrial, office and retail properties changed hands – an 80 percent drop from the fourth quarter of 2007. Over the entire year, property sales volume dropped by 69 percent. Prices fell during the fourth quarter and cap rates climbed. Since their peaks, commercial/multifamily property prices have fallen by 16 percent according to the Moody’s/REAL index and 22 percent according to the NCREIF TBI data.MBA sees loan maturities as a major source of risk in the current environment. One of its recent reports looked at the volumes of upcoming maturities and found that they vary significantly by investor group. Longer-term investors, like life companies, Fannie Mae, Freddie Mac, FHA/Ginnie Mae and the fixed-rate conduit CMBS market, have relatively few loans maturing in 2009 and 2010. Shorter-term investors, such as short-term floating rate CMBS and credit companies, have larger shares coming due this year and next. The result will likely be upward pressure on delinquency rates among certain shorter-term investment groups, and downward pressure on overall origination levels.
Multi-Housing Loan Origination Declined, But Debt Outstanding Remained Stable
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