In our June 23 post, we noted that the majority of the commercial real estate market is continuing to struggle, with Moody’s/REAL Commercial Property Price Index down 49 percent from its peak. With that in mind, we decided to gauge lenders’ interest in deals by measuring lender reply rates on Scotsman Guide Loan Post. The chart below shows lender reply rates by category for the past 17 quarters.
Reply rates peaked in early 2010 and have come down a bit over the past few quarters. The multifamily category lead the decline with a drop of 12 percentage points to an average reply rate of 78 percent from the fourth quarter of 2010 to the first quarter of 2011. On a year-over-year basis, the hard money category has shown the biggest decline with a 16 percentage point decline to 79 percent. Based on several conversations with lenders, this could be more a reflection of a constrained capacity to lend rather than a lower interest level in commercial deals, however.
Based on these numbers, it looks like lenders are still interested in funding deals, but perhaps are a bit more cautious than they were a few quarters ago. Perhaps the deterioration of underwriting standards in the commercial mortgage-backed securities market has had something to do with that.