Commercial Real Estate Foreclosures Surge 48% in September
Commercial real estate foreclosures experienced a significant spike in September, marking a 48% increase year-over-year. The data, provided by ATTOM, highlights growing financial stress in the commercial real estate sector.
Commercial Real EstateForeclosuresAttomReal Estate MarketCommercial MortgagesReal EstateOct 24, 2024
Starting in June 2023, foreclosure numbers saw a sharp increase, peaking at 752 in May 2024, before settling at 695 in the most recent data for September 2024. This recent surge suggests renewed financial stress or changes in commercial real estate dynamics, as noted by ATTOM.
The largest year-over-year increase in commercial foreclosures was observed in California, where foreclosures on commercial buildings soared by 238% compared to the same period last year. New York and Florida also saw significant increases, with foreclosures rising by 48% and 49% year-over-year, respectively.
The delinquency rate for commercial mortgages also saw a slight uptick in the third quarter. According to the Mortgage Bankers Association, the percentage of loans that were 60-90 days late increased to 0.3%, and the percentage of loans that were at least 90 days late rose to 2.7%. Outstanding loan balances that were less than 30 days late, however, fell slightly but remained elevated at 96.8%.
Commercial real estate prices in the US dropped by 9% year-over-year in the first quarter, as reported by the International Monetary Fund. Real estate experts have been warning of more distress to come for the commercial real estate market, particularly in the office segment. Demand for second-tier office buildings has significantly declined since the pandemic, leading some to forecast a wave of forced sales and defaults as debt continues to mature in the sector.
Some property experts speculate that the sale of unused office space could result in a wave of conversions to apartments, which could benefit office owners and help address the housing market's supply constraints. However, such conversions are often difficult and costly for landlords.
Despite the current challenges, more optimistic forecasts predict a rebound for the commercial real estate market. Moody's analysis indicates that transactions in the space have already bottomed out, with sales volume increasing for the first time in two years in September.
Frequently Asked Questions
What caused the increase in commercial real estate foreclosures in September?
The increase in commercial real estate foreclosures in September is attributed to renewed financial stress and changes in commercial real estate dynamics. Factors such as the pandemic's impact on office demand and maturing debt have contributed to this surge.
Which state saw the highest increase in commercial foreclosures year-over-year?
California saw the highest increase in commercial foreclosures year-over-year, with a 238% rise compared to the same period last year.
What is the current delinquency rate for commercial mortgages?
The current delinquency rate for commercial mortgages saw a slight increase in the third quarter, with 0.3% of loans 60-90 days late and 2.7% of loans at least 90 days late.
How have commercial real estate prices been affected recently?
Commercial real estate prices in the US dropped by 9% year-over-year in the first quarter, according to the International Monetary Fund.
What are some potential solutions for the current commercial real estate crisis?
Some potential solutions for the current commercial real estate crisis include converting unused office space into apartments, which could benefit office owners and help alleviate housing market supply constraints. However, such conversions are often difficult and costly for landlords.
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