Commercial real estate lending by banks, insurance companies and other financial institutions is declining as sales activity slows and regulators voice concern about the sector, The Wall Street Journal reports.
Lenders closed roughly $491 billion of mortgage loans backed by U.S. property in 2016, down 3% from 2015, according to new data from the Mortgage Bankers Association.
Most of the decline occurred in the fourth quarter, when volume was 7% lower than the same quarter in 2015, says Jamie Woodwell, the MBA’s head of commercial property research.
Despite the decrease, the new-volume number was the third highest since the association began doing the survey, behind 2015 and the record year of 2007.
The decline from 2015 to 2016 was due partly to a slowing of property sales, meaning fewer buyers needed financing. Buyers, for their part, are getting jittery because values have been rising for eight years and are near record highs.
Regulators have been expressing concern about overheated commercial real estate lending. At the end of the third quarter of 2016 there were 521 institutions insured by the Federal Deposit Insurance Corp. with potentially worrisome concentrations of risk, according to an FDIC report earlier this year. That is up from 474 institutions in the third quarter of 2015, the report says.
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