The commercial real estate mortgage banking environment in early 2020 is nothing like it was a year ago. The major stock market indices opened the new year by hitting record highs after climbing more than 20 percent in 2019. That’s a dramatic turnaround from 12 months earlier when a fourth-quarter selloff had set back the market more than 15 percent.
The 10-year Treasury yield, a benchmark for long-term financing in commercial real estate, has hovered around 1.8 percent early this year, some 140 bps lower than it was near the end of 2018.
One variable that has remained consistent, however, is the vast amount of commercial real estate liquidity available to borrowers. Mortgage banksers are expected to originate $683 billion in commercial property and multifamily loans in 2020,. according to the Mortgage Bankers Association (MBA) based in Washington, D.C. If that figure is realized, it would represent a 9 percent increase over MBA’s projection of $628 billion in loan volume in 2019, also a record.
MBA’s outlook even represents a departure from its view a year ago, acknowledges Jamie Woodwell, MBA’s vice president for commercial real estate research. Back then the organization anticipated that rising interest rates in 2019 would dent commercial real estate values. But instead, interest rates reversed course.