All market sectors show opportunity for growth, but the commercial and multifamily sectors show the most potential, according to Jamie Woodwell, vice president of commercial and multifamily research at the Mortgage Bankers Association, MBA NewsLink reported May 22.
Commercial and multifamily mortgage debt outstanding rose to $2.4 trillion last year, Woodwell told attendees at the MBA Commercial/Multifamily Servicing and Technology Conference May 19-22 in Phoenix. The majority of mortgage debt outstanding — $836 billion — is in bank portfolios, followed by commercial mortgage-backed securities with $561 billion, agencies and government-sponsored enterprises with $376 billion and life insurance companies with $326 billion.
“We're in an interesting shift from threat to opportunity,” Woodwell told the conference, MBA NewsLink reported. “Instead of talking about all the challenges we've been facing, we're now seeing opportunities coming out of these challenges.”
Mortgage banking firms closed $244 billion in commercial and multifamily mortgages in 2012, up from $184 billion in 2011 and well above 2009's low of $82 billion, MBA NewsLink reported.
“Starting in 2009, we saw some big pullbacks in how much debt there was to be serviced,” Woodwell said, MBA NewsLink reported. “In 2012 — for the first time since the downturn — we saw the overall balance increase. We're starting to see the balances come back and we're starting to see the opportunities.”
Woodwell told the conference that Fannie Mae, Freddie Mac and life insurance company loans all performed well through the downturn. However, he noted that as the economy bounces back, it does so in different ways and in different places.
“That has a huge impact on where malls, office buildings and industrial buildings are doing better or doing worse,” Woodwell said, MBA NewsLink reported. “In absolute terms, cap rates have been low. Cap rates today are pretty darn low. But on a relative basis, cap rates are pretty darn high. While the property values are high relative to income, compared to the return an investor could get on other investments, they are not too high. There is a fair amount of buffer, so as interest rates rise, that buffer can absorb some of that interest rate rise.”