Apartment Loan Delinquencies Are Back at 8%, and 2016 Is a Bad Comparison

The delinquency rate on private-label US apartment mortgage securities rose to 8.09% in October, about 5 basis points above September. It has climbed for five straight months since June and now sits at roughly six times the 2024 low.

The number usually gets written up as the highest since 2016. One look at the cliff on the left-hand side of this chart shows how odd that comparison is. In early 2016 the rate fell from 8.2% to 2.4% in a single month, nearly six percentage points. That was not the market healing. It was the roughly $3 billion loan on New York's Stuyvesant Town being paid off. One loan, six points of a national index.

The same thing is happening now. October's 5 basis point rise came mostly from a single $210 million apartment loan in the San Francisco Bay Area going delinquent. In that same month the all-property commercial real estate rate actually fell 15 basis points to 7.87%, because a separate $975 million loan returned to current.

That tells you the pool is small and concentrated enough for one loan to set the direction, which makes month-to-month moves hard to read as a trend. The bulk of US apartment debt sits with Fannie Mae, Freddie Mac and banks, not in these securities.

It works as one sample. It does not work as a thermometer for American apartment credit.

Source: Trepp's October CMBS delinquency data and real estate trade coverage of the individual loans that moved the month (Image: @KobeissiLetter)