U.S. Commercial Mortgage Debt Surpasses $4.7 Trillion Mark in 2023

In January 2024, sales of existing single-family detached homes in California experienced a year-over-year increase across all major regions. The Central Valley region led with a 12.5% rise, followed by the Far North (6.8%), San Francisco Bay Area (6.2%), and Central Coast (5.2%). Even Southern California saw a modest increase of 2.2%. However, 14 out of 52 counties tracked by C.A.R. witnessed a decline in sales, with Mono County registering the largest dip at 50%.

On the price front, most major regions reported an annual increase in median prices. The San Francisco Bay Area saw the highest jump at 10.6%, while Southern California, Central Valley, and the Central Coast also experienced growth.

The Far North was the only region to record a price decline of -2.0%. Despite fluctuations, home prices showed improvement in 41 counties, with Santa Barbara leading at 43.8%.

While unsold inventory increased by 28% on a month-over-month basis, it decreased by -8.6% compared to January 2023. The Unsold Inventory Index dropped from 2.5 months in December to 3.2 months in January, signaling a slightly tighter market.

Active listings declined year-over-year in 35 counties but increased in 16 counties, with Contra Costa experiencing the largest dip at -36.0%.

New active listings statewide increased for the first time in 19 months, indicating a potential improvement in overall inventory. The median days to sell a California single-family home decreased from 39 days in January 2023 to 32 days in January 2024.

Additionally, the statewide sales-price-to-list-price ratio was 98.9% in January 2023, showing sellers’ ability to fetch prices close to their listing prices.

The average price per square foot for an existing single-family home rose to $386 in January 2024 from $370 a year ago. However, the 30-year fixed-mortgage interest rate averaged 6.64% in January, up from 6.27% in January 2023, potentially impacting affordability and buyer demand.

Overall, while California’s housing market witnessed positive trends in sales and prices in January 2024, challenges such as inventory shortages and increasing mortgage rates persist, influencing market dynamics and buyer-seller interactions.U.S. Commercial Mortgage Debt Reaches New High of $4.7 Trillion in 2023

The Mortgage Bankers Association’s recent quarterly report on U.S. Commercial / Multifamily Mortgage Debt Outstanding revealed that by the end of 2023, commercial and multifamily mortgage debt outstanding had surged by $130 billion, marking a 2.8 percent increase compared to the end of 2022.

In the fourth quarter of 2023 alone, total mortgage debt outstanding experienced a 0.9 percent uptick, rising by $41.8 billion to reach $4.69 trillion.

Multifamily mortgage debt witnessed a notable growth, expanding by $25.0 billion (1.2 percent) during the fourth quarter and accumulating a yearly increase of $88.5 billion (4.4 percent) to hit $2.09 trillion.

Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research, commented on these findings, noting that while there was growth in commercial mortgage debt in 2023, the pace was relatively slow compared to previous years.

Woodwell attributed this to a significant decrease in mortgage originations, which plummeted by approximately 50 percent compared to 2022. Despite this decline, few loans were paid off, thereby helping to sustain portfolio sizes despite lower inflows.

The four major investor groups in commercial and multifamily mortgages include commercial banks, commercial mortgage-backed securities (CMBS), collateralized debt obligation (CDO), and other asset-backed securities (ABS) issues, federal agency and government-sponsored enterprise (GSE) portfolios and mortgage-backed securities (MBS), and life insurance companies.

Breaking down the data, commercial banks retained the largest share of commercial/multifamily mortgages at 38 percent, amounting to $1.8 trillion. Agency and GSE portfolios and MBS held the second-largest share, with $1.0 trillion (21 percent of the total).

Life insurance companies followed closely, holding $733 billion (16 percent), while CMBS, CDO, and other ABS issues collectively held $593 billion (13 percent).

The report’s analysis encapsulates the holdings of loans or, if the loans are securitized, the form of the security. For instance, life insurance companies invest in both whole loans where they hold the mortgage note and in CMBS, CDOs, and other ABS where security issuers and trustees hold the note.

This data categorization enables a comprehensive understanding of the distribution of commercial and multifamily mortgage debt across different investor groups.

Analyzing Multifamily Mortgage Debt Outstanding

In the realm of multifamily mortgages, agency and government-sponsored enterprise (GSE) portfolios along with mortgage-backed securities (MBS) take the lead, holding the lion’s share of total debt outstanding at $1.0 trillion, accounting for 48 percent of the total. Following closely behind are commercial banks, with $612 billion in multifamily mortgage debt, constituting 29 percent of the total.

Life insurance companies also play a significant role in the multifamily mortgage landscape, holding $235 billion in debt, making up 11 percent of the total. State and local governments are also notable participants, holding $116 billion (6 percent). Meanwhile, commercial mortgage-backed securities (CMBS), collateralized debt obligation (CDO), and other asset-backed securities (ABS) issues collectively hold $67 billion in multifamily mortgage debt, representing 3 percent of the total.

Dynamics of Commercial & Multifamily Mortgage Debt Outstanding

During the fourth quarter of 2023, various sectors witnessed shifts in their holdings of commercial and multifamily mortgage debt. Among these, Agency and Government-Sponsored Enterprise (GSE) portfolios and Mortgage-Backed Securities (MBS) experienced the most substantial rise in dollar terms, with their holdings increasing by $15.5 billion, marking a 1.6 percent uptick. Commercial banks also saw notable growth, with their holdings expanding by $14.8 billion, representing a 0.8 percent increase.

Similarly, life insurance companies bolstered their holdings by $9.9 billion, reflecting a 1.4 percent increase. Nonfinancial corporate business entities increased their mortgage debt holdings by $1.3 billion, constituting a 1.1 percent rise. Conversely, finance companies observed the most significant decline, witnessing a 5.0 percent decrease amounting to $1.9 billion.

In terms of percentage change, agency and GSE portfolios and MBS recorded the most significant increase at 1.6 percent in their holdings of commercial and multifamily mortgages.

Multifamily Mortgage Debt Dynamics

Between the third and fourth quarters of 2023, multifamily mortgage debt outstanding witnessed a significant rise of $25.0 billion, marking a 1.2 percent increase. Notably, agency and Government-Sponsored Enterprise (GSE) portfolios and Mortgage-Backed Securities (MBS) experienced the most substantial surge in dollar terms, with their holdings of multifamily mortgage debt increasing by $15.5 billion, representing a 1.6 percent uptick.

Commercial banks also contributed to this growth, boosting their multifamily mortgage debt holdings by $5.3 billion, which translates to a 0.9 percent increase. Similarly, life insurance companies expanded their holdings by $5.2 billion, constituting a notable 2.2 percent increase.

Conversely, finance companies observed a significant decline in their multifamily mortgage debt holdings, witnessing an 8.9 percent decrease amounting to $1.2 billion. In terms of percentage change, life insurance companies recorded the most substantial increase in their multifamily mortgage debt holdings at 2.2 percent, while finance companies experienced the most considerable decrease at 8.9 percent.

Analyzing Changes in Commercial/Multifamily Mortgage Debt During 2023

Throughout the span from December 2022 to December 2023, notable shifts were observed in the landscape of commercial/multifamily mortgage debt outstanding. Among the key findings, agency and Government-Sponsored Enterprise (GSE) portfolios and Mortgage-Backed Securities (MBS) witnessed the most substantial surge in dollar terms, registering an impressive $49 billion increase, equivalent to a 5.1 percent uptick.

Simultaneously, life insurance companies also expanded their holdings of commercial/multifamily mortgages, marking a significant $43.5 billion rise, representing a robust 6.3 percent increase.

In terms of percentage changes, nonfinancial corporate businesses emerged as notable players, experiencing the most substantial increase in their holdings of commercial/multifamily mortgages at 12.7 percent.

Analyzing Changes in Multifamily Mortgage Debt Outstanding During 2023

Throughout the course of 2023, multifamily mortgage debt outstanding witnessed a notable upswing, with an increase of $88.5 billion, marking a substantial 4.4 percent rise. This surge reflects the dynamic shifts within the multifamily housing sector.

In terms of dollar value, agency and Government-Sponsored Enterprise (GSE) portfolios, along with Mortgage-Backed Securities (MBS), emerged as the primary contributors to this growth. Their holdings of multifamily mortgage debt saw a remarkable 5.1 percent increase, amounting to $49.0 billion.

Conversely, finance companies experienced the most significant decline in their multifamily mortgage debt holdings, with a notable decrease of $2.7 billion, marking a considerable 17.7 percent downturn.

Clare Trapasso
Clare Trapasso
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