• Commercial Loan Delinquencies Rise, China’s Growth in Population and GDP Drop

    Commercial Loan Delinquencies Rise

    Delinquency rates for mortgages backed by commercial and multifamily properties rose slightly from the prior quarter in the final quarter of 2022, the Mortgage Bankers Association reported Tuesday.

    “Delinquency rates increased by small amounts for most property types even while the overall rate of delinquency remains low,” Jamie Woodwell, the trade group’s head of commercial real estate research, said in a statement.

    The bankers group said 98% of outstanding loan balances in the U.S. were current or less than 30 days late at the end of the fourth quarter, down slightly from 98.3% at the end of the third quarter. The year ended with 1.6% of loans 90 or more days delinquent, up from 1.4% six months earlier.

    Loans backed by lodging and retail properties “continue to see the greatest stress,” the statement said, with both categories registering upticks in delinquency rates to end 2022. The trade group said 6.1% of lodging-related property loans by balance were 30 or more days delinquent, up from 5.5% at the end of September.

    The group’s report said 5.4% of retail property loans by balance were 30 or more days delinquent, up from 5.3% in the prior quarter, along with 1.6% of office property loans, up from 1.5%. Industrial property loans ended the fourth quarter with delinquency at just 0.3%, down from 0.6% in the prior quarter and another sign of general financial health amid high demand for that type of real estate.

    China’s Population, GDP Growth Drop

    China this week reported historic declines in its population and economic growth rates, with implications for global demand and competition for U.S. goods and services — and possibly needs for business space.

    China’s National Bureau of Statistics said the country’s mainland population, excluding foreigners, fell by 850,000 from the prior year to approximately 1.4 billion at the end of 2022, the first annual decline since 1961. This trend if it continues could affect long-term prospects for the world’s second-largest economy, which grew 3% in 2022 for an expansion rate down sharply from 8.1% in 2021.

    Analysts said the latest numbers derive from a combination of several factors, including severe COVID-related restrictions in China that exacerbated the economic effects of several years of low birth rates. According to the World Bank, which finances development projects in low and middle-income countries, persistent slow growth in the world’s largest economies can have significant ripple effects worldwide.

    Even before the latest China data release, the World Bank was predicting global economic growth of 1.7% in 2023, the third-weakest pace of growth in nearly three decades. Dropping demand for goods within China comes as several countries are dealing with high inflation, rising energy prices and other fallout from Russia’s invasion of Ukraine.

    “The United States, the euro area, and China are all undergoing a period of pronounced weakness, and the resulting spillovers are exacerbating other headwinds faced by emerging market and developing economies,” World Bank economists said in a report last week. “The combination of slow growth, tightening financial conditions, and heavy indebtedness is likely to weaken investment and trigger corporate defaults.”

    Source: www.CoStar.com