Commercial mortgage outlook for Q2 2021 to be positive



Amid ongoing industry concerns, the rise in commercial and multi-unit mortgage activity is improving market outlook next year, according to CRE’s financial board.

The group’s sentiment index climbed to its highest level, 119.2, in the second quarter from 118.7 in the first quarter and 84.4 a year ago. The survey started at a baseline of 100 in Q4 2017.

According to the survey, 83% of board members view CRE’s business as positive over the next 12 months, up from 72% in the quarter to 21% in the year. At the same time, 58% expressed a positive attitude towards the environment of CRE next year, which is about 59% in the first quarter and almost four times more than 15% a year earlier.

88% of those surveyed said their commercial lending programs are operating at full capacity, with 7% working partially and 5% not starting a new business. They changed from 71%, 24% and 6% in the first quarter and 34%, 54% and 11% year on year. In addition, 31% said they had more transactions in the second quarter than before the pandemic began.

Other industry analyzes confirm the increasingly positive picture. IN Forecast of the Mortgage Bankers Association commercial and multi-family lending will reach $ 486 billion in 2021 and $ 539 billion in 2022, after 2020, will generate $ 440 billion.

“As restrictions are lifted across states across the country and economic growth resumes, we look forward to a strong recovery with investors eager to leave the scene,” Lisa Pendergast, CREFC chief executive, said in a press release.

However, government policies and regulations are becoming increasingly negative. The 30% share assumes a policy of limiting CRE funding over the next 12 months, down from 13% quarterly and 15% annually. Any changes, including LIBOR transition, reforming state enterprises, and agreement with Community reinvestment law or heightened environmental, social, and governance requirements may constrain investment.

“For example, a similar exchange for real estate under Section 1031 allows borrowers to defer tax recognition on the sale of property in order to purchase a similar property. The deferred tax regime is the main driving force behind transactions, and ending it could further burden the CRE industry, which is struggling to recover from the pandemic, ”a CREFC spokesman told NMN.

Not all CREs go through the same way though. The trade association took retail properties as most disturbing after the coronavirus, office space and hotels follow. Least concern is the industrial sector, with several families next in line.

“Trade and hotels remain the most stressful since the pandemic, and the study found that post-COVID office productivity issuessaid Eric Thompson, Chairman-elect of the CREFC Board of Governors. “However, REO buyouts and assets remained relatively low, and at much lower than expected at the beginning of the crisis ”.

Concerns over CRE problem loans seem to have diminished since the start of the pandemic. The latest survey results showed that 90% think commercial lending will be better than it was after the global financial crisis in 2008, and 5% worse, compared to 91% and 9% in the first quarter and 31% and 54% in June 2020. …


Source link