CREF Forecast: Commercial/Multifamily Borrowing and Lending Expected to Increase 29 Percent to $576 Billion in 2024 (2024)

FAQs

What is the commercial lending forecast for 2024? ›

MBA Forecast: Commercial/Multifamily Borrowing and Lending to Increase 26 Percent to $539 Billion in 2024 | MBA.

Anthony Capizzano, senior vice president of consumer lending at Axos Bank, predicts the federal funds rate will likely fall between 0.25% to 0.50% in 2024.

Fannie Mae Manufactured Community Housing Loans

Loan size: $1 million minimum, no maximum. Loan term: 5 to 30 years. Amortization: Up to 30 years. Leverage: 75%-80% maximum LTV.

Overall, CRE maturities will rise to $929 billion in 2024, representing 20% of the $4.7 trillion in outstanding loans, with banks holding 47% of the maturing volume (Figure 2). The number of loans maturing this year has raised concerns about default risk and the potential for an increase in distressed assets.

The Mortgage Bankers Association expects commercial loan origination to rise to $576 billion in 2024, a 29% increase from 2023's estimated total of $444 billion.

WASHINGTON, D.C. (April 23, 2024) — Total commercial real estate (CRE) mortgage borrowing and lending is estimated to have totaled $429 billion in 2023, a 47 percent decrease from the $816 billion in 2022, and a 52 percent decrease from the record $891 billion in 2021.

In its latest U.S. Economic Outlook, the Economics Group of Wells Fargo Bank puts the 30-year conventional mortgage rate at 6.4% in the third quarter of 2024, declining to 6.25% by the end of the year. Wells Fargo economists predict that the average rate will dip below 6% in the second quarter of 2025.

It's the percentage of the property's value that the lender is willing to finance. For multifamily properties, an LTV of 75% to 80% is typical. For example, if a property is appraised at $1 million, a lender might offer a loan of up to $750,000 to $800,000.

The first ratio commercial lenders look at is the Loan-To-Value Ratio. The (LTV) equals the amount of the commercial mortgage divided by the market value of the property as determined by a commercial appraisal. Typically, Loan-To-Value Ratios for commercial real estate loans are capped at 75% or 80%.

What is a good loan-to-value ratio for commercial real estate? ›

The loan-to-value ratio for a commercial property depends on loan, asset and lender types. In general, commercial loan LTV ratios fall between 65% and 80%. Multifamily housing is offered at an average of 73% LTV and is often maxed out by conventional lenders at 80%.

Compelling opportunities will emerge for commercial real estate investors in 2024, as high interest rates and an economic slowdown—perhaps even a mild recession—lead to bargain pricing for certain assets.

Mortgage rates should continue declining this year as the U.S. economy weakens, inflation cools and the Federal Reserve cuts interest rates. The 30-year fixed mortgage rate is expected to fall to the low-6% range through the end of 2024, potentially dipping into high-5% territory in 2025.

The Global Economy in a Sticky Spot

Global growth is projected to be in line with the April 2024 World Economic Outlook (WEO) forecast, at 3.2 percent in 2024 and 3.3 percent in 2025. Services inflation is holding up progress on disinflation, which is complicating monetary policy normalization.

Consumers and businesses are likely to continue cutting spending and investments ahead, suggesting economic growth decelerated to 0.6 percent annualized in Q3 2024. GDP growth probably will be lackluster in Q4 2024, expanding at a tepid pace of about 1 percent annualized.