Building upon a great year, the Mortgage Bankers Association (MBA) is predicting the multi-family sector of the housing market will only get bigger and better in 2020.
A “great year” in 2019 translates into multi-family mortgage originations rising +24% in Q3 2019 compared with Q3 2018 and +9% from Q2 2019. A “bigger and better year in 2020” translates into an “all-time high in multi-family mortgage originations.
Jamie Woodwell, vice president of commercial real estate research with the MBA, said, “There’s been a lot of attention paid to what might be ahead for commercial real estate and commercial real estate finance markets, given the uncertainty in the global economy. Throughout the industry, borrowers, lenders and others are working through whether to take today’s market as it is, or to plan for interest rates, property values and loan performance that may be markedly different.”
Woodwell believes five factors will fuel the multi-family market in 2020. Take a look:
- Job Growth
- The long, steady job growth has been a boon to the commercial office market.
- The MBA is predicting that job gains will remain steady though steady at a slower pace. Demand for space will follow that steady, slower pace.
- Rising Household Formation
- “Here come the Millennials.” The demographic shifts happening concurrent with the Millennial push is predicted to positively impact the demand for housing, goods and services as well as the ways in which those products will be purchased and consumed.
- Health of the Consumer
- Currently, the MBA see household balance sheets as being “healthy” with record lows of financial obligations and debt service payments. Student loan debt is the outlier stickler here.
- The MBA cautions, however, that consumer confidence sentiments could change with global and political variations.
- Consumer confidence sentiments, if and when changed, could impact housing demand within all splinter sectors.
- Low Interest Rates
- The MBA believes “lower for longer” appears to be the most likely path for interest rates.
- Search for Yield
- Property values are growing faster in secondary and tertiary markets and investors are following, if not gobbling up, those values.
- The credit curve for CMS bonds have been falling and flattening…that translates into investors being more willing to take on more risk.
Wodell concluded, “No one has the answers here…but the market’s focus on (these above factors) is changing the complexion of what is being done and how different players are acting.”
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