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Commercial Mortgage Delinquency Rates Slightly Declined in Q2
Delinquency rates for commercial mortgages showed a marginal improvement in the second quarter amid a challenging economic landscape.
Jordan B. & Han-Gwon Lung
July 28, 2024
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Good morning. Commercial mortgage delinquencies dipped slightly in Q2 2024, the MBA reported, with CMBS loans leading in delinquencies but also showing a decline.
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Commercial Mortgage Delinquency Rates Slightly Declined in Q2
Delinquency rates for commercial mortgages showed a marginal improvement in the second quarter amid a challenging economic landscape.
What happened: The Mortgage Bankers Association (MBA) reported that the overall delinquency rate for commercial mortgages 60-90 days overdue dropped by one basis point to 0.2% in Q2. Additionally, 97% of outstanding loan balances were current or less than 30 days late, a slight increase from 96.8% in Q1. The percentage of loans 90+ days delinquent or in REO remained steady at 2.5%.
Between the lines: Jamie Woodwell, MBA's head of commercial real estate research, noted that delinquency rates declined for most property types, except office properties, which saw an increase. The pace of delinquencies for office property loans, however, has slowed recently.
Breakdown of Delinquency Rates by Property Type
Office Properties: Delinquencies increased to 7.1%, up from 6.8% in Q1.
Lodging Loans: Decreased to 5.8% from 6.3%.
Retail Balances: Dropped to 4.5% from 4.7%.
Multifamily Balances: Fell to 1.1% from 1.2%.
Industrial Property Loans: Reduced to 0.8% from 1.2%.
➥ THE TAKEAWAY
Looking ahead: Woodwell added, "Commercial properties are navigating a unique set of challenges shaped by fluctuating interest rates and property values. Each loan and property will need to adapt to evolving conditions based on specific factors like property type, market trends, and loan terms, with further adjustments expected as more loans reach maturity throughout the year."
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📈 CHART OF THE DAY
At the start of 2019, about one-third of the largest U.S. cities saw rent growth exceed 5% year-over-year. In early 2022, all 100 major cities experienced rent growth over 5% due to a housing demand surge. However, rent growth has since slowed significantly, with Madison, WI now the only major city where YoY rent growth is above 5%. Data from Apartment List.
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