U.S. Commercial and Multifamily Mortgage Delinquency Rates Remain at or Near All-Time Lows for 2018
Through the first quarter of 2018, commercial and multi-family mortgage delinquency rates remain at the low levels of late 2017 (with rates having fallen from a peak in 2012). This is good news for investors in real estate. Delinquency rates for all groups other than CMBS were under 1 percent, with life company portfolios and Freddie Mac hitting a low of 0.02 percent. The figures cover more than 80 percent of the outstanding debt.
It is worth noting that the higher CMBS rate (3.93 percent) may reflect the shorter period after which these loans are considered delinquent. It is 30 days rather than 60 for Fannie Mae, Freddie Mac and life company portfolios and 90 days for banks and thrifts. All of these figures are based on the unpaid principal balance.
The low rates are driven primarily by increasing property values combined with low interest rates. Financing is also readily available, which then feeds back into both increased debt and increased rates of pay off. Banks are more likely to give loans with delinquency rates this low, which is good news for purchasers and investors. Now is a great time to take out a mortgage on a multi-family building, especially as interest rates remain low.
The data does not however include construction and development loans, which tend to be higher risk. This is all despite the fact that the overall debt is rising which is obviously influenced by improving property values and by a good climate for investors. Outstanding debt reached $3.11 trillion in the third quarter of 2017 and the trend is still upwards.
Nonetheless, this may not be a cause for concern given the low and stable delinquency rates, which indicate that banks and lenders are not taking on bad risks. In fact, it may indicate a strengthening economy.
The evidence points towards real estate continuing to be a good investment in the near and ongoing future. Potential investors should take this into account. Although economic growth might tempt some investors to diversify outside of the traditionally-safe area of real estate, the fact is that real estate investment is clearly paying for itself enough to ensure that debts can be paid off.
Multifamily properties are a particularly good source of investment income in the current housing market.
If you need more information about investing in real estate, especially in multifamily properties, or if you are looking for a property to invest in, contact Lambert Investments today.