Prices Recover for US Commercial Property as Mortgage Defaults Fall
Bloomberg – Businessweek reports: Defaults on commercial property mortgages held by US banks fell in the fourth quarter from the previous three months, the first decline in almost five years, as prices began to recover, Real Capital Analytics said.
The default rate on loans for US office buildings, malls and other commercial properties dropped to 4.28% of loan balances from 4.36% in the third quarter, according to the real estate research firm. It was the first such decline since the first quarter of 2006.
According to Dr. Sam Chandan, Real Capital’s global chief economist, the drop “suggests that the sector’s contribution to bank distress may have reached a plateau. As market conditions improve, particularly in larger metros, banks are slowly working to charge off more bad loans.”
The rate of defaults is declining as commercial property values start to rise. US commercial real estate prices gained 5.5% in the four months ending December 2010 from an eight-year low in August 2010, according to the Moody's/REAL Commercial Property Price Indices. New York, Washington and other big metropolitan areas are leading the recovery as well-leased properties attract investors.
View the full article on Bloomberg – Businessweek: Prices Recover for US Commercial Property as Mortgage Defaults Fall
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