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Commercial and multifamily mortgage debt outstanding grew by $47.7 billion in the third quarter of 2024, bringing the total to $4.75 trillion, according to the Mortgage Bankers Association’s (MBA) latest report. Multifamily mortgage debt led the way with a $29.8 billion increase, or 1.4%, continuing its dominance as the sector with the most growth this year.
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MBA found that life insurance companies were the largest contributors to the expansion of the real estate credit market, increasing their holdings in commercial and multifamily mortgage debt by $21.2 billion, or 2.9%. Agency and government-sponsored enterprise (GSE) portfolios, along with mortgage-backed securities (MBS), followed with an increase of $12.3 billion, or 1.2%. Meanwhile, CMBS, CDO, and other asset-backed securities (ABS) grew by $9.6 billion, while banks and thrifts added $6.1 billion, or 0.3%, to their portfolios.
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Despite the modest growth from banks, they still hold the largest share of commercial and multifamily mortgages, totaling $1.8 trillion. However, MBA noted that multifamily mortgage debt continues to outperform every other property asset type in terms of growth.
MBA reported that life insurance companies experienced the largest percentage increase in their multifamily holdings, up 4.3%, or $10 billion, reflecting continued demand for these assets. Agency and GSE portfolios also showed activity, adding $12.3 billion, or 1.2%, to their multifamily holdings. Banks, while contributing less overall, still added $4.7 billion, or 0.8%, to their multifamily debt portfolios.
While multifamily was the best-performing asset class in terms of new debt originations, MBA found that the broader commercial mortgage market also demonstrated steady growth in the third quarter. Life insurance companies accounted for nearly half of the total growth in commercial and multifamily mortgage debt. At the same time, CMBS, CDO, and ABS issues increased their holdings by $9.6 billion, or 1.6%.
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However, MBA noted that pension plans reduced their exposure to commercial and multifamily debt outstanding by 8.8%, potentially reflecting a shift in risk profiles among these investors.
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The ongoing demand for multifamily properties, especially from life insurance companies and GSE portfolios, underscores the strength and resilience of the commercial real estate sector. MBA’s findings from the third quarter highlight continued confidence from investors in commercial mortgage-backed securities and other asset-backed securities, along with shifting risk appetites for schemes such as pension funds. While life insurance companies, agency portfolios, and banks continued to increase their holdings in real estate debt, the overall market reflects a mixed trajectory. This trend could improve next year as inflation levels stabilize and lower borrowing costs drive a boom in originations.