Commercial and multifamily mortgage loan volume increased in between 2009 and 2010, with preliminary data from the Mortgage Bankers Association putting last year’s volume at $110 billion.
Jamie Woodwell, MBA’s vice president of commercial real estate research, said, “Life companies and FHA led the increase in dollar volumes, but a large percentage increase in originations for CMBS is likely the most symbolic change from last year.”
By property type, health care properties had the higher mortgage origination volume index value at 301 for the fourth quarter, up just 4% over the same period in 2009. This was followed by hotels at 198, up 169%; retail at 184, up 94%; industrial, 150, up 98%; and multifamily, 138, up 81%.
The office sector had an index value of 79, up 170% on a year-over-year basis. This is the highest index for the sector since the second quarter of 2008.
A report from Colliers International said the office market recovery is for real. “The national office market would appear to be in the midst of a full-fledged comeback,” said Dylan Taylor, chief executive for Colliers International in the U.S. “As the velocity of this recovery accelerates over the next few months, we would expect to see additional occupancy gains and increased rental rates throughout a growing number of key markets.”
Life companies had origination volumes 155% higher in 2010 over 2009, and for the fourth quarter up 170%.
On a fourth-quarter year-over-year basis, Fannie Mae and Freddie Mac combined were up 65%. But both companies recently released data that shows their multifamily business had declined in 2010 when compared with 2009.
Fannie Mae provided $17 billion in mortgages for multifamily properties in 2010, down from $20 billion in 2009. Freddie Mac’s multifamily business had $15 billion in volume for 2010, down from $17 billion in 2009.
Mike May, executive vice president of Freddie Mac Multifamily, said, “The market was slow early in the year, and then it was like a switch was flipped on in the third and fourth quarters and market volume surged. We funded approximately 50% of our annual volume in the fourth quarter.
“Property owners who were sitting on the sidelines early in the year started buying and selling properties later in the year partly due to market optimism, low interest rates and wanting to complete deals before the end of the year.”
In the MBA data, the duo’s index values for each of the first three quarters of 2010 is below that of the same three quarters the prior year.
The highest index value for originators is at life companies, at 250 for the fourth quarter, up from 176 for the third quarter and 93 for the fourth quarter 2009.
But the biggest gainer percentage-wise year-over-year at a whopping 6,110% is conduits. They had an index value of 1 for the fourth quarter 2009, and over the next three quarters that grew to 5, 11 and 16, respectively. While all of those were stronger than for the same quarter in 2009, none even approach the index value for the fourth quarter of 2010 of 62.
The index value for commercial banks declined 25% between the fourth quarter 2009 and 2010 to 64.
Separately, the latest quarterly survey from the National Multi Housing Council found the Equity Financing Index rose to a record high at 74%, with 52% of respondents saying they had greater access to equity capital for multifamily properties now than the previous three months.
The debt financing index fell from 82 in the October 2010 survey to just 48 for the most recent survey, due to higher interest rates in the past three months. Still half of the survey’s respondents said borrowing conditions were unchanged compared with three months’ prior.
Higher demand is continuing to drive a tighter rental market as the Market Tightness Index hit 78, up from 77 in the October survey.
“Rising apartment demand reflects a drop in demand for homeownership in today’s marketplace. This growing demand against the backdrop of the lowest apartment starts in 40 years—barely enough to offset the units lost to demolition and obsolescence—will result in further tightening in the apartment sector in the near term,” said NMHC chief economist Mark Obrinsky.
