Commercial Mortgage Default Rate More Than Doubles in Q4'09
BusinessWeek reports: The default rate for commercial property mortgages held by US banks more than doubled in Q4'09 and may peak at 5.4% at the end of 2011, according New York-based research firm Real Capital Analytics, Inc.
The firm reported the default rate for loans on office, retail, hotel and industrial properties jumped to 3.8% from 1.6% a year earlier. The default rate for loans on apartment buildings rose to 4.4% from 1.8%.
“The level of distress continues to rise irrespective of improving economic trends,” Dr. Sam Chandan, Real Capital’s global chief economist, said in an interview.
The US jobless rate fell to 9.7% in January from 10% in December, after hitting a 26-year high of 10.1% in October. Unemployment and tighter credit are hurting CRE values, which fell 29% in December from a year earlier and are down 41% from the October 2007 peak, according to the Moody’s/REAL Commercial Property Price Index released yesterday.
Real Capital's data show US banks with $100 million to $1 billion in assets hold 25% of commercial property loans outstanding and 15% of apartment loans. The biggest banks, those with more than $10 billion in assets, hold about half of commercial loans and two-thirds of apartment loans.
“With the concentration of commercial mortgages in small and community banks, there is a potential spillover that will impinge on their ability to make loans to small businesses and families,” Chandan said.
View the full article on BusinessWeek: Commercial Mortgage Default Rate More Than Doubles in Q4'09
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Posted by: Nina Turner