Expect Strong 2017 Commercial and Multifamily Market

Survey: Commercial and Multifamily Originators Expect Strong, Steady Market in 2017.

Specific findings include:

• Lenders remain eager to make loans – 96 percent of originators reported that in 2016 lenders had a “strong” or “very strong” appetite to make new loans and 77 percent expect lenders’ 2017 appetite to be “strong” or “very strong”.

• Borrowers are eager to take out loans - 80 percent of originators reported that in 2016 borrowers had a “strong” or “very strong” appetite to take out new loans and 69 percent expect borrowers’ 2017 appetite to be “strong” or “very strong”.

• A full 92 percent of originators reported that in 2016 their own firm had a “strong” or “very strong” appetite to make new loans. A slightly lower share (85 percent) expect their own firm’s 2017 appetite to be “strong” or “very strong”.

• Most originators expect the market to grow in 2017 (and their own firms to grow more quickly). One-quarter of respondents (26 percent) expect total market originations to increase 5 percent or more in 2017. Half (50 percent) expect their own originations to increase by 5 percent or more.

• There are mixed views on how origination volumes may change for individual capital sources. Pluralities of originators believe each major investor group, with the exception of life insurance companies, will see no change in origination volume; the plurality expect life insurance companies to increase volumes by 0-5 percent. Originations are generally expected to be flat or increase for commercial mortgage-backed securities (25 percent anticipate growth > 5%), life insurance companies/pensions (18 percent anticipate growth > 5%), bank portfolios (18 percent anticipate growth > 5%), FHA (15 percent anticipate growth > 5%) and Fannie Mae and Freddie Mac (10 percent anticipate growth > 5%).

• Loan returns are expected to increase in 2017. Half of respondents (50 percent) characterized the loans made in 2016 as “somewhat” or “very low” return. Less than one-third (30 percent) expect loans to be “somewhat” or “very low” return in 2017.

• Loan risk is expected to increase slightly in 2017. More respondents characterized the loans made in 2016 as low risk than as high risk. In 2017, most respondents expect loans to be medium risk (53 percent), with the reminder evenly split between seeing higher and lower risk loans.

• The majority of respondents (52 percent) expect potential regulatory and legislative changes could be positive for the market. One-in-four respondents (28 percent) anticipate a neutral impact and one-in-five (20 percent) see potential negative impacts.

• Among the top reasons cited for positive impacts were potential changes to Dodd-Frank rules - particularly risk retention - and a more positive economic climate. Among the reasons cited for negative impacts were uncertainties that could be caused by changing rules.</i>

The 2017 MBA CREF Outlook Survey was conducted between December 2 and December 22, 2016. The survey request was sent to leaders of 60 of the top commercial/multifamily mortgage origination firms, as determined by MBA’s 2016 Annual Origination Rankings Report. The survey had a response rate of 50 percent. Percentages shown are calculated based on applicable responses. Non-responses and “n.a.” responses are excluded from the percentage denominator.