Lenders are forecast to complete $248 billion of loans backed by income-producing properties — down from 2019's record volume of $601 billion, according to a new projection by the Mortgage Bankers Association.
Lending for multifamily is expected to fare slightly better than nonresidential property types, with those loans making up 86% of this year’s activity. That’s up from 60% in 2019
The MBA estimated multifamily lending will total $213 billion, down from last year's record of $364 billion, a 42% decline.
"The multifamily sector has held up quite well so far, with federal government stimulus efforts for the unemployed helping renters make their rent payments,” Jamie Woodwell, MBA's vice president for commercial real estate research, said in a statement. “Should such support continue as the economy rebounds, the apartment market will likely remain relatively balanced."
Despite major disruptions in the labor market and the unemployment rate rising above 14%, renters have continued to make their payments, the MBA noted. This can largely be attributed to measures in the $2.2 trillion federal coronavirus relief package that included one-time stimulus checks.
A pause on evictions at properties backed with federal money was written into the law. That ban expires Saturday. Enhanced unemployment benefits — $600 extra per week — are also set to go away unless Congress renews them.
The MBA is anticipating that some form of federal support for renters will continue.
“You have to give a lot of credit to the stimulus package because that has kept a lot of people that are otherwise unemployed the means to continue to pay their rent,” Don King, executive vice president of Walker & Dunlop, one of the largest real estate finance companies in the county, told CoStar.
“I know there is a lot of work going into some form of additional stimulus,” King added. ”I know we and the MBA having been lobbying for a rental assistance program.”
Such a program would help cover rent payment and not just extend an eviction moratorium.
Over all property types, the MBA is anticipating a partial rebound in lending volumes in 2021, with activity rising to $390 billion and multifamily making up $308 billion, or about 80% of the total.
Given how quickly the current downturn came on, it’s still too early to tell what the impact on property values has been.
"Net operating incomes, property values and cap rates across the different property types are expected to experience varying levels of stress in the months ahead, with hotel and retail properties already being the hardest hit,” Woodwell said.
Hotel and retail properties have seen significant declines in incomes and falling investor interest.
For office properties, the outcome may hinge on the tug of war between how dramatically companies embrace teleworking on the one hand and how they reconfigure their space — and increase space per worker — to promote social distancing on the other.