Forecast: Commercial and Multifamily Mortgage Markets to Stabilize in 2024

According to the Mortgage Bankers Association's (MBA) Commercial Real Estate Finance (CREF) Outlook Survey for 2024, commercial and multifamily mortgage originators will continue to experience an unsettled market for borrowing and lending, but anticipate those conditions will stabilize over the course of the year.

"Commercial real estate markets are entering 2024 amid a great deal of uncertainty and, as a result, a significant slowdown in activity," said Jamie Woodwell, MBA's Head of Commercial Real Estate Research. "Leaders of top commercial real estate finance firms believe that a host of factors may continue to act as a drag–rather than a boost–to the markets. However, they do believe that overall uncertainty will dissipate over the year, helping to boost borrowing and lending above 2023 levels."

Highlights of MBA's 2024 CREF Outlook Survey include:

• More than 90% of respondents consider today’s market either somewhat or very unsettled.
• Among property types, the office market is viewed as most negatively affecting today’s borrowing and lending. Meanwhile, half of respondents view the industrial outlook as having positive impacts.
• Cap rates and valuations, base interest rates, and rate volatility are all viewed as having negative impacts on today’s financing activity.
• Originators expect the market to stabilize over the course of 2024.
• In 2024, lenders are expected to have a (slightly) stronger appetite to lend than borrowers will have to borrow.
• Borrowing and lending volumes are generally expected to rise in 2024.
• Expectations for particular capital sources vary broadly.
• There is a wide range of views as to whether the supply of or demand for debt is greater.
• Across a variety of factors affecting the CRE finance volumes, more are seen as negative than positive for 2024.

According to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report on Q3 of 2023, the level of commercial/multifamily mortgage debt outstanding increased by $37.1 billion (0.8%) in the third quarter of 2023. Total commercial/multifamily mortgage debt outstanding rose to $4.63 trillion at the end of Q3, while Multifamily mortgage debt alone increased $26.8 billion (1.3%) to $2.05 trillion from Q2 of 2023.

“The level of commercial mortgage debt outstanding has continued to increase despite a continued pullback in borrowing,” said Woodwell. “A decline in sales transaction and refinance volumes has meant less new debt being extended, but it also means that fewer loans are paying off than in many earlier periods. The result is that debt levels continue to rise, but at a pace that is roughly half of what was seen last year.”

The 2024 MBA CREF Outlook Survey was conducted between November 30 and December 15, 2023. The survey request was sent to leaders at 60 of the top commercial and multifamily mortgage origination firms, as determined by MBA’s 2022 Annual Origination Rankings Report. The survey had a response rate of 40%. Percentages shown are calculated based on applicable responses. Non-responses and “n.a.” responses are excluded from the percentage denominator.