The Everest Newsletter: Commercial, July ’18 Edition

Commercial mortgage debt sees the biggest boost since pre-2008

Just the Peaks

This newsletter, at a glance

  • Commercial/multifamily mortgage debt rose by an astounding $44.3B in Q1
  • This is the greatest gain in the commercial mortgage sector since 2007, prior to the Great Recession.
  • Multifamilies performed particularly  well, up $19.3B for an increase of 1.5%.

Read on for more on the multifamily market’s breakout performance

A report from the Mortgage Bankers Association reveals some surprisingly strong numbers for the commercial real estate market. In the first three months of 2018, major investors increased their debt holdings by $44.3B, representing a 1.4% boost from late 2017. 

Great Recession, gone?These stats signal a healthy market for investors like you who hope to expand their commercial real estate portfolios this year. The reported gains are not only the highest since 2007, but they also indicate a particularly strong showing from the multifamily sector, which saw $19.3B in added debt for a 1.5% quarterly increase.

The Mortgage Bankers Association tracks and studies mortgage trends by breaking up holdings per investor class, which includes banks and thrifts [40%]; GSE portfolios and mortgage-backed securities [19%]; life insurance companies [15%]; and CMBS, CDO and ABS [14%]. A smaller 5th category is comprised of other assorted investors [12%]. 

Comparing each category’s numbers to the disaster a decade ago, industry experts seem extremely optimistic. This is the first instance since the Great Recession in which all four major sectors saw positive surges in Q1. It’s also the first time commercial mortgage-backed securities [CMBS] have had three consecutive positive quarters since 2007.

 

The ‘Big 4’ breakdown
Mortgage Debt Outstanding
2018 Quarter 1

Commercial banks

+$15.0B

GSE & MBS

+$10.8B

Life insurance

+$9.1B

CMBS

+$5.6B

*Stats contributed by Mortgage Bankers Association, June 2018

 

Behind the boom 

As Vice President of Research and Economics at MBA Jamie Woodwell reveals, “This year’s increase was driven by the CMBS market, which added $6B of mortgages to its balances. This is a sharp contrast to the $21B decline over the same period in 2017.” 

With U.S. commercial and multifamily debt totaling $3.21 trillion, people in finance couldn’t be more thrilled. Not to mention that across America, multifamily mortgage delinquencies remain at an all-time low. “This continues to be driven by strong property fundamentals, increasing property values, still-low mortgage rates and readily available financing,” says Woodwell.

Bottom line: Multifamilies are having a moment
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