CMBS-Related Loan Delinquencies Shoot Up; New York State Spared Jumps, For Now

The delinquency rate on loans related to commercial mortgage-backed securities (CMBS) skyrocketed to 2.67 percent from 2.27 percent just last month and 0.46 percent a year ago: a 580.43 percent increase from 2008.

But the worst is still to come, according to Moody’s Investors Service’s July report on CMBS delinquencies: Expect the aggregate delinquency rate to rise to 5 or 6 percent by the end of 2009, as the Great Recession continues to finish off so many of the real estate loans made during the recently departed boom.

Hotels witnessed the largest increase in delinquencies in June—from 2.02 percent to 3.26 percent. The industrial sector saw the second-largest rise, to 1.96 percent from 1.40.

Though the multifamily delinquency rate remains the highest, it’s stabled at a rate of 4.58 percent compared to 4.56 percent a month ago. The retail delinquency rate, on the other hand, increased more than expected to 2.92 percent.

Office properties remain the best performing of the five sectors, witnessing a milder rise in its delinquency rate from 1.34 percent to 1.60. But across the board, the delinquency rate for all five property types (besides multifamily this month) is growing higher and faster.

The Eastern United States still is the nation’s strongest performer, with a delinquency rate of only 1.57 percent, from 1.15 percent at the beginning of June. While New York State owns 12.16 percent of the real estate market, only 1.16 percent of CMBS loans in the state are delinquent.

The Midwest, on the other hand, surpassed the South as the U.S.’s weakest performer, with its delinquency rate rising to 3.96 percent in June: the nation’s largest increase.

After South Dakota and Washington D.C., which both have a miraculous delinquency rate of 0.00 percent (for once, the question has become: Couldn’t we all be more like South Dakota?), the two best-performing states are deep in the Bible Belt: Arkansas, with a delinquency rate of 0.28 percent, closely followed by West Virginia with 0.29 percent. Unfortunately, South Dakota, Arkansas, and West Virginia add up to only 0.48 percent of the U.S. real estate market.

Michigan had the distinction of becoming the worst-performing state this month with a delinquency rate of 7.80 percent, while Nevada finished second with 6.93 percent. Rhode Island, the country’s worst-performing state in May, finished third with 6.65 percent. CMBS-Related Loan Delinquencies Shoot Up; New York State Spared Jumps, For Now