Sunday, January 11, 2009

Commercial Loan Delinquencies Rise, Jump, Soar, Surge, Double…

We all know we are going to see increased delinquency rates and losses on income property loans. But, it’s not happening yet to any substantial degree. That doesn’t keep some sources from writing headlines like these:

Wall Street Journal: 
Commercial Property Loses Shelter: As Delinquencies Surge in $3.4 Trillion Market, Investors Brace for a Big Hit 

New data from Deutsche Bank show that delinquencies on commercial mortgages packaged and sold as bonds, which represent nearly a third of the commercial real-estate debt market, nearly doubled during the past three months, to about 1.2%…
Calculated Risk: Commercial Delinquencies Double Over Last 90 Days Same as the WSJ quote above
Smart Money: Commercial Delinquencies Jump in November Fitch Ratings said delinquencies jumped to 0.64% from 0.51% in October…
Bloomberg: Commercial Delinquencies to Rise, Barclays Says

Payments more than 60 days late on commercial real estate loans that were bundled together and sold as bonds increased to 0.69 percent last month, compared with 0.57 percent in October and 0.51 percent in September, Barclays data show.

Financial Week: Commercial mortgage delinquencies
on the rise
Banks with more than $10 billion in assets charged off 0.2% of non-farm, non-residential loans in the first nine months of 2008, according to the Federal Deposit Insurance Corp. The rate remains low, but is more than three times the rate of charge-offs for the same period in 2007.

Please, folks, calm down. Delinquencies and losses have been at historic low levels. Yes, when a rate goes from 0.6% to 1.2% it has doubled, but it’s still a very low rate (for comparison, 1-4 unit delinquencies are 6.99%). I’ve already talked about this in a previous post (Data Trap: Big Percentage Increases in Small Numbers).