Categorized | Commercial

Commercial Real Estate Loan Delinquency Rate on the Rise

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The number of commercial real estate loans falling into delinquency increased significantly during the month of March. Many loans that were secured in 2007 are now starting to come due for many businesses. As such, the delinquency rate continues to rise as many borrowers are defaulting on their loans.

 

In March alone, there was over five billion dollars in newly delinquent loans. Currently, there is over fifty-eight billion dollars in delinquent commercial loans in the United States, and the delinquency rate is nearly at ten percent.

 

The worst performing commercial real estate loans in terms of delinquency were those for office and multifamily properties. The delinquency rate for office commercial loans hit its worst level ever, nearly hitting ten percent.

 

The only commercial real estate sector to show any signs of improvement was the hotel sector, which dropped by more than forty basis points.

 

The increase in delinquency rate has not exactly come as a surprise to most economists. Many had circled 2012 on their calendars, as it is this year that many of the toxic loans from 2007 are set to come due.

 

There has been no clear indication as to what the impact will be on the market as a whole. Most economists do not believe that the increase in delinquencies will have the same impact that the residential real estate crash had in 2007. With that said, however, there will likely be a number of banks that are forced to close their doors. Five banks failed in March, adding to the four that went under in February.

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About Drew Wilson

Drew focuses on the Commercial and Mortgage/Finance categories.

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