Jamie Woodwell, head of commercial real estate research at MBA, shed some light on current market trends: “The logjam in the commercial real estate markets that began last summer has remained firmly in place. Questions about supply and demand dynamics for some properties, the rise and volatility in interest rates, the low number of transactions, and coinciding lack of price discovery have all contributed to a marked decline in demand for new mortgages. Unfortunately, those and other factors will likely continue to exert downward pressure on borrowing and lending volumes in the coming quarters.”
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Woodwell pointed out that there’s a tight link between the ups and downs of property prices and commercial mortgage originations. The big question mark hanging over the future direction of interest rates is adding to the current slowdown.
“If interest rates and cap rates were to fall, that should help boost values and promote borrowing,” Woodwell said in the report. “If they remain higher for longer, as is increasingly likely, that will suppress activity. This uncertainty is a contributing factor in today’s slowdown.”
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Source: mpamag.com