Code Red. Multifamily real estate defaults looming

Looks like the summer continues to heat up! While everyone is focused on the office CRE crisis, the risk of apartment/multifamily real estate defaults is detonating. Last week we sounded the “code red” alarm on the imminent commercial real estate debt crisis. This week, the Wall Street Journal published an article titled “A Real-Estate Haven Turns Perilous With Roughly $1 Trillion Coming Due” reporting, “Apartment buildings, long considered a real-estate haven, are emerging as the next trouble spot in the beleaguered commercial-properly world.” The article quotes veteran real- estate finance executive, Peter Sotoloff, as stating, “Apartment landlords face a hydrogen-bomb scenario” and noting multifamily mortgages more than doubled over the past decade with nearly $1 trillion in debt coming due between 2023 and 2027, while interest rates for new loans have skyrocketed.

If that is not enough to get you considering a safe-haven asset like gold, also this week, Bloomberg has reported Moody’s cut the ratings of 10 U.S. small to medium-sized banks (M&T bank, for example) and placed larger well-known lenders under review including Bank of New York Mellon, U.S. Bancorp, and Northern Trust, among others.

Buckle your seatbelts!