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Commercial lending up substantially in second quarter

By: 13 August 2011 No Comment

The national Mortgage Bankers Association reported that commercial and multifamily mortgage loan originations were up 107 percent in the second quarter compared to the same three months last year.

One thing striking about the report – from a residential standpoint – is that there was a 114 percent increase in mortgages for multifamily properties. In other words, there is clearly a demand out there for rental properties and the market is rushing to meet it.

While real estate markets are still in need of buyers, it appears the demand for rental properties is on the rise. Another striking statistic about the report from the Mortgage Bankers is that the 114 percent increase for multifamily mortgages is substantial, but comes in behind other commercial loans. Indeed, the overall 107 percent increase in the multifamily/commercial category was led by a 141 percent increase in loans for health care properties, a 125 percent increase for hotels and a 116 percent increase in the retail category.

Gains were posted in other categories, too. There was a 54 percent increase in mortgage originations for office properties and a 34 percent increase for industrial properties.

“Commercial/multifamily mortgage borrowing and lending continues to rise from the depths of 2009 and 2010,” said James Woodwell, the Association’s vice president of commercial real estate research. “Greater stability in property fundamentals and prices, and an improving sales market, are providing great clarity for borrowers and lenders alike.

“Property values and interest rates – coupled with job growth, consumer spending, household growth and other macroeconomic trends that drive demand for commercial real estate – will be keys to how property owners seek and qualify for mortgage financing going forward.”

In other words, the growth in commercial real estate lending is encouraging but job growth is a key element to its continued expansion. The July unemployment report from the Bureau of Labor Statistics is somewhat encouraging in that regard. According to the report, unemployment dropped to 9.1 percent in July from 9.2 percent in June as 117,000 jobs were added across the nation.

While that’s nothing to write home about, the 9.1 percent rate is – at the very least – a substantial improvement over the last few months of 2009 when unemployment inched up over 10 percent. The question in everyone’s minds these days is fairly obvious – when will job generation pick up and signal and substantial economic recovery?

Meanwhile, people and groups taking out both residential and commercial mortgages have are at an advantage – interest rates remain very low. The national average fixed interest rate for a 30-year mortgage on a home was 4.45 percent at the first of August and 3.52 percent for a 15-year mortgage.

Combine those rates with dropping home prices and there are deals to be had. The same interest and price dynamics present in the residential market have spilled over – to an extent – to commercial and multifamily properties.

Home Sweet Home is written by Ethan C. Nobles and is sent weekly to publications throughout the Natural State on behalf of the Mortgage Bankers Association of Arkansas.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email =

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