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MortgageReal Estate

MBA: Commercial/multifamily outstanding debt posts largest Q1 increase since recession

Commercial/multifamily debt is on the rise as each major investor class increases its holdings

Outstanding commercial/multifamily mortgage debt just posted the largest first quarter increase since before the Great Recession, a report from the Mortgage Bankers Association shows.

According to the report, commercial/multifamily mortgage debt increased by $44.3 billion in Q1. The new total is $3.21 trillion, $1.3 trillion of which is multifamily mortgage debt.

MBA Vice President of Commercial Real Estate Research Jamie Woodwell said that this is an encouraging sign that indicates a strong market.

"During the first three months of 2018, commercial and multifamily mortgage debt outstanding increased more than during any other Q1 since before the Great Recession," Woodwell said in a statement.

"Interestingly, Q1 holdings grew more slowly this year than last among the three largest investor groups: banks, life insurance companies, and the GSEs [government sponsored enterprises]. This year's increase was driven by the CMBS [commercial mortgage backed securities] market, which added $6 billion of mortgages to its balances. This is a sharp contrast to the $21 billion decline over the same period in 2017. For the first time since 2007, CMBS has seen three straight quarters of increase," Woodwell continued.

This means that things are going swimmingly in the financial world, and Woodwell says the industry has strong fundamentals to thank for the good vibes.

"Strong property fundamentals and property values continue to support mortgage borrowing and lending…property owners have multiple sources of capital from which to get financing," Woodwell told HousingWire.

In Q1, banks and thrifts saw the largest increase in their holdings of commercial/multifamily mortgage debt with an increase of $14.7 billion or 1.2%.

In terms of strictly multifamily mortgage debt, there was a 1.5%, $19.3 billion increase from Q4 to Q1. GSE portfolios and mortgage backed securities were responsible for the lion’s share of this increase, bolstering their holdings by 1.8%, a $10.8 billion increase.

In terms of percentage growth, finance companies saw the largest growth, increasing their holding by 5%. This is stark contrast to pension funds which saw the largest decrease in holdings by percentage with a 4.8% decrease.

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