Dive Brief:
- The multifamily commercial mortgage-backed securities delinquency rate jumped above 2% in June, increasing 66 basis points to 2.36%, according to data provider Trepp. In May, the rate rose 37 bps to 1.70%. In June 2023, it was 1.59%.
- The servicing rate for multifamily CMBS loans fell 26 bps to 5.17% in June after rising 33 bps to 5.43% in May, according to Trepp. In June 2023, it sat at 3.28%.
- Multifamily wasn’t alone in seeing increases in servicing and delinquencies in June. The Trepp CMBS delinquency rate for commercial real estate climbed 38 bps to 5.35%. The servicing rate ticked up two bps to 8.23%.
Dive Insight:
While the office sector accounted for roughly half of the newly delinquent $1.87 billion loans in June, retail and multifamily were next in line, accounting for 27% and 20%, respectively. However, multifamily was well behind office, mixed-use, retail and lodging when it came to new transfers to special serving.
Once properties fall delinquent or go into servicing, their values usually decrease. In an analysis of distressed properties that received updated appraisals in 2023 or 2024, real estate data firm Cred iQ found that CRE assets declined 43% from their original valuation.
However, distressed multifamily properties only saw a 35% decline in valuations, which was consistent with Cred iQ’s fourth quarter 2023 analysis. In comparison, the office sector posted a 53% decline, and hotels hit 40%.
As Fannie Mae and Freddie Mac provide debt to multifamily properties and equity players are ready to make buys, there may be a floor for apartment price declines, even in distressed situations.
“There's a ton of capital on the sidelines to be deployed,” said Kel Frazier, president of acquisitions at Boca Raton, Florida-based apartment owner and developer Mill Creek Residential.
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