Outstanding CRE Debt Keeps Growing, Expected to Surpass Pre-Recession Peak

Posted on October 5, 2016

Commercial nonresidential real estate debt outstanding increased 5.4% in the past year and is just $14.4 billion shy of the last peak in 2008, according to the latest data from the Federal Reserve for the second quarter.

Commercial nonresidential debt grew by $34.6 billion last quarter. At that pace, it is likely to surpass its pre-recession peak this quarter.

Multifamily residential debt has never really stopped growing — surpassing each previous year’s volume in seven of the last eight years. And it continues to rise at a double-digit pace, up 10.15% in the past year, according to the Fed.

Total commercial/multifamily debt outstanding rose 6.8% year over year to $3.707 trillion. Multifamily debt outstanding rose to $1.137 trillion, making up 31% of the total volume. Nonresidential debt outstanding rose to $2.571 trillion.

At its peak in 2008, the multifamily portion made up just 25% of outstanding CRE debt.

Government-sponsored enterprises Fannie Mae and Freddie Mac account for a huge amount of that growth. GSE-backed mortgage pools are now the third-largest holders of multifamily debt, growing their holdings 22.7% in the past year. They have more than doubled their holdings since 2008, surpassing private multifamily mortgage securities issuers.

“The amount of commercial and multifamily mortgage debt outstanding grew to a new record during the second quarter, despite a record drop in the balance of CMBS loans outstanding,” Jamie Woodwell, MBA’s vice president of commercial real estate research, reported in MBA’s analysis of outstanding debt. “The CMBS market is seeing far more loans paying off and paying down than new loans being originated.”

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