California Leads the Country in Commercial Foreclosures After More Than Doubling Since 2023

In March, commercial foreclosures in the United States more than doubled compared to the same period last year, as reported by real estate data specialist Attom. The total count stood at 625 foreclosures nationwide, marking a monthly increase of 6% and an annual surge of 117%.

Long-term Trend

The trend of rising foreclosures has been consistent since the onset of the pandemic, with numbers climbing steadily from 141 in May 2020. The peak since Attom began monitoring foreclosures in January 2014 was recorded in October of that same year, reaching 889.

Regional Breakdown

California led in commercial foreclosures for March, with 187 cases, despite an 8% decrease from February. However, this still marked a substantial 405% increase from the previous year. Texas and Florida also experienced significant increases, with Texas witnessing a 31% rise month-over-month and a 129% increase from March 2023, while Florida saw a 30% uptick for the month and a 107% increase for the year.

Delinquency Rates

According to the Mortgage Bankers Association (MBA), delinquency rates for mortgages backed by commercial properties remained consistent during the first quarter compared to Q4. This included 3.2% of loans being more than 30 days late or classified as real estate-owned.

Property Type Analysis

Office properties continued to dominate in terms of delinquencies and foreclosures, as reported by the MBA. Delinquency rates for office-based commercial loans increased to 6.8% in the first quarter, while those backed by hospitality properties rose to 6.3%. However, there was a slight decrease in delinquent retail-backed loans, dropping from 5% at the end of 2023 to 4.7% in Q1.

Expert Insights

Jamie Woodwell, the Head of Commercial Real Estate Research at the MBA, highlighted that loans across various property types are adjusting to higher interest rates and uncertainties surrounding property values. Additionally, the ambiguity regarding the impact of hybrid work arrangements poses an additional challenge for office properties and their associated loans.