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Apartment Default Rates Improve Passing Commercial for Performance | International Residential Real Estate Investors Association
Monday January 22nd 2018

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Apartment Default Rates Improve Passing Commercial for Performance

Apartments March Ahead
The nation’s apartment sector appears to be recovering faster than other segments, in a sort of “first in, first out” play on the recession.

In the second quarter, the multifamily mortgage default rate declined by 47 basis points, from 4.63% to 4.16%, falling below the commercial default rate for the first time in two years.

The default rate for multifamily mortgages surpassed the rate on commercial mortgages in the second quarter of 2008, and remained marginally higher during the following nine quarters.

“The second quarter drop was the first meaningful decline in the multifamily default rate this cycle,” notes the RCA analysis. The volume of multifamily mortgages in default fell by $1.0 billion from the first quarter, to $8.9 billion.

Reflecting differences in loan quality across lender groups, the default rate for bank-held multifamily mortgages is still significantly higher than for multifamily mortgages at Fannie Mae and Freddie Mac. In spite of the challenges in their single-family lending portfolios, the GSEs’ multifamily portfolios continue to perform. The serious delinquency rate for Fannie Mae’s multifamily loans is 0.8% as of June 30, up from 0.5% one year earlier, but much lower than for the market as a whole.

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