Delinquency rates for commercial real estate bank loans continued to decline in the third quarter — but a recent analysis from Trepp suggests performance in the coming quarters may not be as strong as price appreciation slows and recession fears mount.

In an analysis of Trepp's Anonymized Loan-Level Repository (T-ALLR) data, which is comprised of bank balance sheet loans totaling more than $180 billion across multiple banks, the firm notes that after a slight uptick in CRE mortgage delinquencies in the first quarter, the recovery resumed in Q2 and Q3 with the overall delinquency rate now hovering at 0.70%, near the 0.76% level observed pre-COVID in Q1 2020. In addition, the serious delinquency rate has fallen by four basis points to 0.54%.

Hospitality has the highest delinquency rates but the pace of delinquency did slow in Q3 after increasing in the second quarter. Originations for the sector was around half the pre-COVID pace.