Yikes.
With rates rising unexpectedly I think you’re going to see a large surge in CRE foreclosures because they can’t afford to refinance.
Rates are too high.
It’s already starting 💀 pic.twitter.com/bPEDHW6a7k
— QE Infinity (@StealthQE4) November 1, 2024
The commercial real estate (CRE) market is facing a surge in foreclosures as rising interest rates make refinancing unaffordable for many property owners.
CRE foreclosures have risen by 117% year-over-year, with March 2024 seeing 625 commercial foreclosures—the highest monthly total since March 2015. States like California, New York, and Florida are among the hardest hit, with California experiencing a 238% increase in CRE foreclosures.
Approximately $950 billion in CRE mortgages are set to mature in 2024, with the total expected to peak at $1.26 trillion in 2027. Borrowers facing higher interest rates may struggle to refinance, risking defaults and further pressure on CRE prices.
The office real estate sector is under particular strain as hybrid work models slow the recovery in office utilization, compounding the refinancing challenges for office properties. While some experts expect foreclosures to continue rising, others see early signs of recovery with a recent increase in commercial property transactions in September 2024.
Sources:
- CRE Daily
- Yahoo Finance
- CRE Daily
- S&P Global Ratings: Stressful Conditions For U.S. Commercial Real Estate Are Raising Refinancing Risks
- S&P Global Market Intelligence: Commercial real estate maturity wall $950B in 2024, peaks in 2027