- Number of Small-Balance Commercial Mortgage Originations See Large Declines
- Proportion of Large Commercial Mortgages Originated More Than Doubles Since 2015
- How Commercial Mortgage Origination Trends Differ By Parish
Number of Small-Balance Commercial Mortgage Originations See Large Declines
In 2017, total commercial mortgage originations in Louisiana saw their largest decline in five years, having dropped to 4,978 originations from a peak of 6,277 in 2015. All small-balance loan ranges under $3 million slumped in 2017, registering a drop of 1,601 originations since 2016. The largest decline was in the $500,000 to $1,000,000 range with a 39% drop, followed by 31% in the under $100,000 range.
On the other end of the spectrum, large commercial mortgage originations of $3 million or more saw increases across the board, almost doubling as a group in 2017 and tripling since 2015.
2016-2017 Percentage Change in Commercial Mortgage Originations
On average, this continues a trend of annual declines in small-balance commercial mortgage originations that seems to have peaked in 2015 when viewed on a five-year basis. At the same time, the trend in annual mortgage originations over $3 million showed continued growth.
Year-Over-Year Percentage Change in Mortgages Originated
On average, the United States saw a 3% drop in the number of mortgages originated for amounts less than $3 million. But from 2016 to 2017, Louisiana saw a 27% drop for the same group. Meanwhile, the number of mortgages originated for amounts between $3 million and $20 million has increased by almost 72% within Louisiana over the same period; contrast this against a 3% average increase across the United States as a whole. This trend may reflect a growing disparity between small and large mortgage originations.
Proportion of Large Commercial Mortgages Originated More Than Doubles Since 2015
The number of small-balance commercial mortgages declined over the past two years on both an absolute basis, and as a proportion of total commercial mortgages originated. Based on our data, the average proportion of small-balance mortgage originations across Louisiana declined by 14% when compared to 2015, representing a 1,900 drop in absolute numbers. Meanwhile, the proportion of large commercial mortgage originations more than tripled over that same period.
Proportion of Mortgage Originations 2013-2017: Small vs. Large Commercial Mortgages
How Commercial Mortgage Origination Trends Differ By Parish
The data in the past two years suggest a general downtrend in originations for mortgages of less than $3 million, with an offsetting increase in originations for mortgages greater than $3 million. We note that total mortgage originations are still up overall when viewed over the five-year period from 2013-2017. However, our analysis shows that despite the overall positive trend in mortgage originations, small-balance mortgages continue to decline relative to large mortgages, most noticeably over the last two years. This may be due to shifting preferences for larger commercial properties among businesses, increasing property values or a shift in buyer demographics from small to large commercial establishments.
The chart below shows the overall change in small-balance commercial mortgage originations, over the past five years, as a percentage of overall commercial mortgage originations. The data is split across 30 parishes in Louisiana.
Proportion of Small Balance Commercial Mortgages by Year
|De Soto, LA||83%||86%||100%||90%||100%|
|East Baton Rouge, LA||56%||82%||91%||92%||91%|
|East Feliciana, LA||85%||100%||100%||100%||100%|
|Red River, LA||80%||100%||100%||63%||100%|
|Saint Charles, LA||93%||96%||92%||96%||91%|
|Saint Martin, LA||84%||89%||97%||88%||98%|
|Saint Tammany, LA||98%||100%||99%||100%||99%|
*Note: Complete 5-year data available for 30 out of 64 total Louisiana Parishes.
We analyzed 35 parishes across Louisiana over the five-year period between 2013 and 2017. Not all parishes in Louisiana were surveyed over the period due to data limits. Our study includes only commercial mortgages for amounts of $20 million or less. Commercial mortgages encompass retail, office and restaurant establishments.
Source data was obtained from S&P Global Market Intelligence. The factors used to compute our final results included the following:
- Total number of commercial mortgage originations per year
- Annual change in year-over-year mortgage originations
- Stratified sample of mortgage originations between multiple loan ranges
After obtaining the data above, we evaluated changes in these values on an annual basis and modeled the five-year trend in lending. To help distill diverging trends in mortgage originations, we aggregated the individual loan ranges into two categories: 1) mortgages under $3 million ("small-balance mortgages") and 2) mortgages between $3 million and $20 million ("large mortgages").