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Commercial real estate an uphill battle for investors

Posted by The Aramco Group on Sat, Nov 19, 2016 @ 14:11 PM

Mortgage defaults rose in the commercial real-estate market as banks tightened standards on lending during the third quarter. This follows a slowdown in sales and rising vacancy rates for both commercial and multi-family housing units nationwide.

New regulations governing the lending practices of banks could be a factor in the weakening sales numbers as worried investors take pause. Going into effect on Christmas Eve will be a part of the Dodd-Frank regulatory overhaul which requires commercial mortgage lenders to maintain at least five percent of the securities they create. The new rules will likely push borrowing costs upward.

Currently, more than 5.6 percent of commercial property mortgages are more than 60 days delinquent – this is up from 4.6 percent earlier this year. The possibility of a rate hike by the Federal Reserve before the end of the year could make commercial real estate less attractive to investors.

Today, conforming no-point 30-year fixed rates averaging 3.875 percent while the 15-year rate is near 3.125 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.