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Last year was a slow one for commercial lending, but credit unions managed to gain a small market share despite low loan volumes.
But delinquency rates are starting to rise.
According to the MBA report released March 14, real estate-secured commercial loans held by all lenders as of Dec. 31 were $4.69 trillion, up 2.8% from a year earlier.
Jamie Woodwell, head of commercial real estate research at the MBA, said commercial mortgage debt grew at its slowest pace since the mid-2010s over the past 12 months and the final three months of this year.
Jamie Woodwell
“All major capital sources increased their mortgage holdings during the year,” Woodwell said. “Mortgage origination volumes in 2023 were down about 50% compared to 2022, but this meant that few loans were being repaid, helping to maintain portfolio size even as inflows declined.”
The MBA in January estimated that commercial real estate production fell 46% last year to $444 billion, then projected it would rise 30% to $576.3 billion in 2024 and 25% to $717 billion in 2025.
Credit unions originated $30.6 billion in commercial real estate loans in the 12 months that ended Dec. 31, down 41% from 2022. Loans in the fourth quarter fell 31% to $7.5 billion, according to NCUA data.
Credit unions had $147.9 billion in commercial real estate loans outstanding as of Dec. 31, up 13% from a year ago and up 2.8% from September.
Credit unions ended the year having increased their share of the commercial real estate market to 3.1%, up from 2.8% a year ago.
Credit unions are lending heavily to multifamily projects, which are doing better than retail and office properties that have been hurt by changing shopping and work patterns since the pandemic.
Credit unions had $36.1 billion in multifamily loans outstanding at the end of 2023, up 16% from a year ago and up 3.3% from September.
Credit unions accounted for 1.7% of the $2.9 trillion in multifamily mortgages as of Dec. 31, up from 1.5% a year earlier.
Delinquency rates for credit union commercial loans had remained steadily low, but rose to 0.60% in the fourth quarter, up from 0.32% a year ago and 0.44% in September. This included 7% of commercial loans not secured by real estate, which have had delinquency rates hovering around 2% over the past year.
Multifamily loans and other commercial real estate loans have much lower delinquency rates, but delinquencies have been growing at a much faster pace, especially in the fourth quarter.
The 60-day or more delinquent rate for multifamily loans as of Dec. 31 was 0.23%, up from 0.07% a year ago and 0.09% in September.
Other commercial lending groups also saw delinquency rates rise from the third to the fourth quarter, according to the MBA report released Monday.
“Commercial mortgage delinquencies increased again in the fourth quarter of 2023,” Woodwell said. “All major sources of capital have increased over the past six months as rising interest rates, uncertainty about property values and challenges in some real estate fundamentals permeate the market.”