If you were to just read the New York Times article headline, you would think that all commercial real estate loans are in trouble. But digging into the details from WSJ’s Matthew Goldstein, loans on office buildings were highlighted. Most troubled loans are also in markets like New York and San Francisco, where office hasn't performed well for some time. The article's most revealing fact is that banks are currently reporting a 1.17% delinquency rate. In 2010 after the GFC, that rate was 10.5%. That is nearly 9X where are today.
Are banks under federal government pressure to remove bad loans from their books? The pressure doesn't seem near what the Fed applied in 2008-2012. Approximately $750B in loans must be refinanced for the second half of 2024 and 2025. The pain will come, but it might be localized and asset-specific, as the article points out. Over the next three years, GSE (Fannie & Freddie) loans that are coming due grow while bank debt and CMBS decrease. These are the 5-year term loans financed at the peak of the multifamily cycle in 2021 and 2022.
I suspect that if the Fed lowers interest rates during that time period, it will be much less than borrowers were hoping for.