Posted by: jhamon | July 26, 2009

Commercial Real Estate: The Fuse is Lit

Previously, I posted an entry entitled Commercial Real Estate: Call the Bomb Squad.  I observed that the $3.5 trillion U.S. commercial real estate market is faced with at least $700 billion in mortages that must be refinanced by the end of 2010. 

This massive refinancing represents a new and potentially much greater risk to banks than the residential mortgage debacle. 

The data shows that the situation has continued to unravel.  Consider this from the Memphis Business Journal:

Commercial mortgage delinquency up 585%

Delinquencies on commercial mortgage backed securities soared $10 billion in June, hitting a 12-month high of almost $29 billion, according to Realpoint Research.

California led the nation with the highest amount of delinquent loans, closely followed by Texas and Florida.

Late loans across the country are up an “astounding” 585 percent from a year ago when just $4 billion were delinquent, reported the Horsham, Pa.-based research firm. The low point for delinquency was March 2007 when $2 billion was delinquent.

Realpoint reported that the total unpaid balance for all commercial backed mortgage securities pools under review by the firm was $817 billion in June, down slightly from $825 billion in May as a result of a delay in reporting some deals.

The three states with the most delinquent loans accounted for more than a quarter of the unpaid balances. Realpoint said that California with almost $3 billion in delinquent loans, or 10 percent of the exposure, and Texas with $2.5 billion, or 9 percent of all delinquencies, “remain a major concern.” In California, the delinquent properties are spread across the state, compared to Texas where the problems are located mainly in Dallas-Fort Worth.

The other states among the top 10 are Michigan, Arizona, New York, Georgia, Hawaii, Nevada and Illinois. If delinquencies are counted by only metro areas, Phoenix has the highest at $1 billion and San Francisco has the lowest at $605 million.


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  1. Guess we’re in a false high–but how low will it go this time???

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