The rate of late payments on loans included in commercial mortgage-backed securities has improved every month for more than a year. While there was no change in apartment loan delinquency, the sector’s outlook is very bright.
As of the end of June, delinquency of at least 30 days on securitized commercial real estate loans, including foreclosures and real estate owned, was 4.32 percent.
The metrics were based on $752 billion in CMBS rated by Morningstar Credit Ratings LLC. (this article originally incorrectly attributed the source as Trepp LLC)
CMBS loan delinquency diminished from the previous month, when the past-due rate was 4.55 percent.
Performance has improved each of the last 13 months.
The rate plunged compared to a year earlier, when 6.43 percent of CMBS loans were delinquent.
Morningstar expects the 30-day CMBS rate to fall “well below” 4 percent by the end of 2014.
The report indicated that CMBS issuance is expected to be near $100 billion this year.
June’s biggest improvement came from health care property loans, with the 30-day delinquency rate sinking 690 BPS to 2.8 percent. The steep decline likely reflects a small amount of Morningstar-rated CMBS containing this type of loan.
A 130-basis-point drop was reported for industrial property loans, leaving the rate at 7.3 percent.
At 4.6 percent, the rate on hotel CMBS loans was down 40 BPS from May.
Office property loan delinquency slipped 10 BPS to 6.0 percent.
No change in delinquency from a month earlier left the multifamily loan rate at 2.7 percent.
A report Thursday from Freddie Mac indicated that apartment vacancies are at a 13-year low.
“An estimated 3.9 million potential households weren’t formed due to the Great Recession, with young adults accounting for close to 75 percent of those pent-up households,” Freddie’s report stated. “Over the next decade, an estimated 440,000 multifamily units may be needed each year to meet the growing demand, based on demographic trends.”
Freddie expects multifamily debt originations to be $161 billion this year, down $11 billion from 2013.
Delinquency on retail property loans was also unmoved, leaving the June rate at 5.0 percent.
