May 3rd, 2012
Econintersect: Trepp Wire reports that CMBS (commercial mortgage backed securities) have rising delinquency rates. Haven’t we been hearing that mortgage delinquency rates were falling? That has been for residential mortgages. The types of numbers that have been reported by CoreLogic for residential mortgages have been down from a year ago and changing very slowly over recent months. Not only are the commercial delinquency numbers increasing, they are approximately 25-30% greater (on a percentage basis) than residential mortgages. The residential rates are close to 7% while commercial delinquencies are well in the 9% range.
In February GEI News reported that CoreLogic said the total U.S. loan delinquency rate (loans 30 days or more past due, but not yet in foreclosure) was 7.57% of all mortgages. This was down from February 2011 when the rate was 8.8%. For March Corelogic reported a similar rate of 7.0% for mortgages 90 days or more delinquent, including foreclosures started and those completed and still in REO (real estate owned) status.
Trepp Wire has some graphics in their latest news release that reveal the reasons for concern about commercial real estate loans.
From the Trepp Wire report:
- Office delinquency rate up 82 basis points to a new all-time high of 10.23%—the first time the office rate has ever hit double digits.
- Multifamily delinquency rate falls 21 basis points but remains the worst major property type with a rate of 15.18%.
- Retail delinquency rate drops 26 basis points to 7.98% and is still the best performing major property type.
- Industrial delinquency rate is down 18 basis points, and remains the second worst category.
- Hotel delinquency rate dips eight basis points, closing in on office for second best property type.
It is surprising that the multifamily category is the poorest performer. The surge in residential construction has been fueled by an unusually large proportion of multifamily housing starts. See Steve Hansen analysis.
- Mortgage Delinquencies and Foreclosures Decline in February 2012 (GEI News, 24 March 2012)
- Corelogic Reports 69,000 Completed Foreclosures Nationally in March (CoreLogic, 1 May 2012)
- April CMBS Delinquency Rate Reaches Second Highest Level Ever (Trepp Wire, 1 May 2012)
- March 2012 Residential Permits & Completions Confirm Recovery Underway (Steven Hansen, GEI Analysis, 17 April 2012)
Hat tip to Keith Jurow. Read his latest article on the surprising price declines in some individual markets he is following.