Multifamily Loan Delinquencies Jump 185% in June

Apartment deals with delinquent or specially serviced CMBS loans surged 185% from January to late June, per CRED iQ.

July 14, 2024

Multifamily Loan Delinquencies Jump 185% in June

Apartment deals with delinquent or specially serviced CMBS loans surged 185% from January to late June, per CRED iQ.

Jordan B. & Han-Gwon Lung
July 14, 2024

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Good morning. Multifamily CMBS delinquencies have nearly tripled in six months, signaling broader financial troubles. Episode 1 of the No Cap podcast by CRE Daily is live. Watch or listen here!

Today’s issue is brought to you by Calvera Income and Growth Fund.

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apartment distress

Multifamily Distress Nearly Triples in 6 Months

Source: (Illustration by The Real Deal with Getty)

Multifamily distress in the CMBS market has skyrocketed, with delinquencies nearly tripling in just six months.

Increase in delinquencies: According to a recent report by CRED iQ, multifamily CMBS loans marked as delinquent or in special servicing surged by 185% from January to late June. This marks the most significant increase among all commercial real estate assets during this period, indicating widespread financial stress beyond value-add players struggling with floating-rate loans.

The broader impact: The refinancing landscape remains difficult, with multifamily investors now facing heightened challenges. While fix-and-flip borrowers using CRE CLOs have already seen high default rates, the distress is spreading to multifamily investors with longer-term, fixed-rate CMBS loans. This indicates that even those with more conservative strategies are feeling the strain.

Zoom in: Despite speculations about rate cuts, significant short-term reductions are unlikely. Ryan Severino, BGO’s chief economist, suggests that even if the Federal Reserve cuts rates in September, the reductions may not be enough to alleviate refinancing challenges. This is particularly concerning as 35% of multifamily loans are set to mature within the next 18 months.

➥ THE TAKEAWAY

Big picture: Despite potential rate cuts, short-term reductions are unlikely, keeping refinancing challenges alive. In June, over 7% of multifamily CMBS loans were distressed, slightly below the overall CMBS distress rate of 8.6%. The broader CRE market has also seen record-breaking distress rates for the fourth consecutive month, with multifamily loans showing a distress rate of about 13%.

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