Tuesday, January 26, 2010

"Fear the Boom and Bust" - Hayek vs. Keynes

Monday, January 11, 2010

U.S. CMBS Delinquencies up 42bps; Peak Not Until 2012

Press Release from Fitch:

Rising defaults among all property types led to a 42 basis point (bp) increase in U.S. CMBS delinquencies to close out 2009 at 4.71%, according to the latest Loan Delinquency Index results from Fitch Ratings.

'Though delinquencies have increased approximately five times from a year ago, they may not peak until 2012', said Managing Director Mary MacNeill. 'An increased amount of loans are coming due over the next two years that will result in delinquencies possibly peaking at 12%.' Fitch's surveillance criteria reflect a forward looking view of performance. Therefore, the current ratings on CMBS transactions recently reviewed by Fitch incorporate significantly higher delinquency rates.

Of the five main property types, each has seen an increase in delinquencies of over 195% since December 2008, ranging from multifamily with 196% increase, to hotel, with a 1,175% increase. Delinquency rates for these properties are as follows (along with total dollars delinquent versus total dollars delinquent as of December 2008):
  • Office: 2.66% ($3.9 billion vs. $603.5 million);
  • Hotel: 9.13% ($4.6 billion vs. $363.7 million);
  • Retail: 4.25% ($5.7 billion vs. $1.2 billion);
  • Multifamily: 7.54% ($5 billion vs. $1.6 billion);
  • Industrial: 3.57% ($851.3 million vs. $186.2 million).
With rising vacancy rates and falling rents, the CMBS delinquency rates will keep rising; Fitch estimates the rate will rise until 2012.