Friday, 16 November 2007

Commerical Real Estate Orginations Fall in Q3

The impending drop in Commercial Real Estate is starting to be discussed in wider circles. I even hear the chuckle-heads on CNBC mention it yesterday.

Yesterday the Mortgage Bankers Association (MBA) provided confirmation of all the talk by releasing it's quarterly survey on Commercial and multifamily loan originations. From the MBA:

MBA Commercial/Multifamily Quarterly Survey Shows Decline in Mortgage Originations

Commercial and multifamily mortgage bankers' loan originations dipped in the third quarter, according to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations. Down from the second quarter, third quarter originations were four percent lower than during the same period last year. The year-over-year decrease was seen across most property types and investor groups.

Decreases in total commercial/multifamily mortgage originations were led by a drop in commercial mortgage-backed security (CMBS) conduit loans and commercial bank loans. These numbers show the impact of the recent credit crunch and other market disruptions.

"The on-going credit crunch slowed the volume of commercial/multifamily mortgage originations in the third quarter," said Jamie Woodwell, MBA’s Senior Director of Commercial/Multifamily Research. "Originations for commercial mortgage-backed securities (CMBS) fell 28 percent from the same quarter last year, and two-thirds from the second quarter of 2007. Originations for life companies, the government-sponsored enterprises (Fannie Mae and Freddie Mac) and commercial banks all increased between the second and third quarters, leading to an overall decline of just 4 percent between the third quarters of 2006 and 2007."

(click on image for a sharper view)

As shown above the Commercial / Multifamily Mortgage Bankers Origination Index fell to it's lowest level since 1Q2006 and dropped 30% from the high reached in 2Q07. Whilst this is a backward looking report it is useful for providing confirmation of the drop in off in Commercial Real Estate.