Chart of the Week
Every Friday, MBA's Chart of the Week provides commentary and analysis on a topic of interest for the industry. This comes from variety of data sources, including proprietary data from MBA's own surveys and studies, as well as from government agencies and other reliable sources of mortgage, housing, and economic data.
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Current Chart of the Week
Delinquency rates for commercial property mortgages increased in the fourth quarter of 2024, according to the Mortgage Bankers Association's (MBA) latest Commercial Real Estate Finance (CREF) Loan Performance Survey.
Most property types experienced an increase in delinquency rates over the quarter, with industrial properties the lone exception. Delinquencies on office loans reached 8.6% at the end of the quarter, up from 7.7% at the end of last quarter. Office properties faced the greatest challenges due to weak fundamentals and persistently high interest rates, whereas other property types continued to benefit from a relatively strong economy. Multifamily delinquency balances increased to 1.4% from 1.2% at the end of the third quarter. Moderating rent growth and higher vacancy rates coupled with elevated operating costs in many markets are pressuring some multifamily property owners.
Delinquencies on industrial properties declined to 0.4%, down from 0.6% at the end of the prior quarter. Although there has been a substantial new supply of industrial properties, the performance on these loans is still quite strong.
Among capital sources, Commercial Mortgage-Backed Securities (CMBS) loans experienced the highest delinquency rates, with 5.3% of balances 30 days or more delinquent, up from 4.8% in the prior quarter. GSE loans experienced a minor increase, reaching 0.6%. FHA multifamily and healthcare loans saw a modest rise to 1.0%. Life company loans improved slightly, dropping to 0.86%.
There are many factors that could influence delinquency rates in the year ahead. First and foremost, the direction of interest rates, which could either help or harm the ability of borrowers to refinance loans at maturity. MBA forecasts that the Fed will make just one additional cut before holding for this cycle, and that longer-term rates, while remaining volatile, will stay relatively flat over the forecast horizon.
Second, changes in trade policy, tax policy, and other new initiatives from the new presidential administration have the potential to change the demand for space and the lending environment, with different impacts across the various property types and capital sources.
We look forward to seeing you in San Diego to discuss these trends and much more.
- Mike Fratantoni ([email protected]) Reggie Booker ([email protected]) Dianna Takacs ([email protected])