CHARLOTTESVILLE, VA—It's official. The commercial real estate lending market has returned to health, or at least is on the cusp of doing so, according to two separate reports, one by SNL Financial, the other by Chandan Economics. Both note that loan delinquencies are reaching post-crisis lows and that lending is increasing at a healthy clip.
SNL reports that US commercial banks saw a 14-quarter low delinquency rate of 5.28% on commercial real estate loans as of the end of June, and the ratio of bad CRE loans has more than halved from the peak of 10.76% nine quarters ago. A number of banks, many based in California, have a clean bill of health now in terms of faulty CRE loans.
Chandan echoes these findings, noting the second quarter saw "the largest onequarter drop in the bank CRE and multifamily default rate so far into the recovery." The default rate across commercial real estate and apartment loans held by banks fell to 3.11% in Q2—the lowest in three years.
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