If you want a positive perspective on the 2018 mortgage market, look no further than the Mortgage Bankers Association’s (MBA) 2018 CREF Outlook Survey.
The survey is comprised of input from leading commercial and multifamily mortgage originators at 60 of the top firms throughout the country, as determined by MBA’s 2017 Annual Origination Rankings Report, according to an MBA press release. The survey was conducted between Nov. 28 and Dec. 22, 2017, with a response rate of 50 percent.
About 78 percent of top commercial/multifamily firms anticipate an uptick in originations in 2018, with 22 percent indicating that they expect a 5 percent overall increase, or more, market-wide. Regarding expectations for their own firms, nearly half (47 percent) said they expect to see an increase of 5 percent or more throughout the year.
“Mortgage bankers look to 2018 as another growth year for the commercial and multifamily mortgage markets,” MBA Vice President for Research and Economics Jamie Woodwell said in the release. “The majority of top firms expect a ‘very strong’ appetite from lenders and a ‘strong’ appetite from borrowers to drive commercial mortgage originations higher.”
The outlook for 2018 largely mirrors that of 2017, according to Woodwell, who said the overall market likely will benefit from recently passed tax reform legislation and regulatory relief measures that are expected in 2018. However, he also noted that rising short-term and long-term interest rates “are expected to be a drag” on financial markets.
Other takeaways from this year’s survey include the following:
- Survey results indicate that lenders remain eager to make loans, with all respondents reporting in 2017 that lenders had a “strong” or “very strong” appetite to make new loans and 93 percent saying they those appetites to be “strong” or “very strong” in 2018. Fifty-nine percent said they expect “very strong” appetites and 33 percent expect “strong” appetites.
- Borrowers are eager to take out loans, according to the results, which indicate that 93 percent of originators found borrowers had a “strong” or “very strong” appetite to take out new loans in 2017 and 74 percent expect borrowers’ 2018 appetites to be “strong” (59 percent) or “very strong” (15 percent).
- Originators were unanimous in reporting that their firms had a “strong” or “very strong” appetite to make new loans in 2017, while a lower share (89 percent) said they expect their firm’s 2018 appetite to be “strong” or “very strong.”
- The results indicate that there a variety of opinions regarding potential changes in origination volumes for specific capital sources in 2018. Twenty-three percent of originators said they anticipate growth of more than 5 percent in commercial mortgage-backed securities, 12 percent expect similar growth in life insurance companies and pensions, 12 percent have similar expectations for bank portfolio growth, 17 percent expect more than 5 percent growth in Federal Housing Administration (FHA) loans and 24 percent expect Fannie Mae and Freddie Mac to grow by 5 percent or more.
- Loan returns and risks are both expected to increase slightly in 2018.
- Most originators anticipate rises in 10-year Treasury rates, office capitalization rates and retail cap rates, while apartment cap rates and industrial cap rates remain flat.
- Most originators also expect new construction activity and secondary market reform to have little potential impact.