The faltering economy has led to a spike in construction loan delinquencies, and the problem could deepen in the near term. The delinquency rate on apartment construction loans registered 3.7% in the third quarter, up from 2.9% in the second quarter, according to real estate research firm Foresight Analytics of Oakland, Calif. Delinquencies on commercial construction loans rose from 4.1% to 5.2% during the same period.
What's more, the volume of construction lending on commercial properties rose 4% in the third quarter to $307 billion. Multifamily lending activity also climbed moderately in the third quarter, rising to $47.6 billion from $46.6 billion in the second quarter. The results are based on an analysis of lending activity at FDIC-insured commercial banks and thrifts.
The silver lining perhaps is that any expansion of construction activity earlier this year is not likely to continue into the fourth quarter, according to Foresight Analytics.