U.S. banks have steadily expanded their portfolios of foreclosed commercial properties at a time when selling them brings in less money.
Banks posted a 30% annual increase in these property assets at the close of the first quarter of this year, with a total asset value of $2.83 billion, according to data from the Federal Deposit Insurance Corp. Even as the total amount of foreclosed holdings is growing, the total gain on sales of those properties is near the lowest point in the last five years. First quarter gains totaled $41.2 million.
In the fourth quarter of 2022, just after the Federal Reserve began raising borrowing rates in the back half of 2022, banks reported $335.7 million in gains on far fewer foreclosed property holdings.
The tally of foreclosed properties started expanding in the first quarter of 2023, one full quarter after the Federal Reserve started a push to raise interest rates to fight inflation. The first quarter 2025 total is spread out thinly across 835 of the 4,496 banks covered by the FDIC. The number of banks holding foreclosed properties is up from 777 at the end of 2023.
The increases have shown up across the FDIC’s three categories: construction and development properties, multifamily properties, and nonresidential commercial properties. Bank holdings of foreclosed multifamily properties more than tripled to $1,845.1 million — the highest total in six years.
The amount of nonresidential commercial foreclosed holdings, which include office, industrial and hospitality properties, stood at $2.14 billion at the end of the quarter, according to the FDIC data. That was 31% higher than a year earlier and approached the highest total of the past six years of $2.36 billion in the first quarter of 2021.