by Calculated Risk on 1/11/2010 09:53:00 AM

Press Release: Fitch: U.S. CMBS Delinquencies up 42bps; Peak Not Until 2012 (ht ron at Wallstreetpit)

Rising defaults among all property types led to a 42 basis point (bp) increase in U.S. CMBS delinquencies to close out 2009 at 4.71%, according to the latest Loan Delinquency Index results from Fitch Ratings.

'Though delinquencies have increased approximately five times from a year ago, they may not peak until 2012', said Managing Director Mary MacNeill. 'An increased amount of loans are coming due over the next two years that will result in delinquencies possibly peaking at 12%.' Fitch's surveillance criteria reflect a forward looking view of performance. Therefore, the current ratings on CMBS transactions recently reviewed by Fitch incorporate significantly higher delinquency rates.

Of the five main property types, each has seen an increase in delinquencies of over 195% since December 2008, ranging from multifamily with 196% increase, to hotel, with a 1,175% increase. Delinquency rates for these properties are as follows (along with total dollars delinquent versus total dollars delinquent as of December 2008):

--Office: 2.66% ($3.9 billion vs. $603.5 million);
--Hotel: 9.13% ($4.6 billion vs. $363.7 million);
--Retail: 4.25% ($5.7 billion vs. $1.2 billion);
--Multifamily: 7.54% ($5 billion vs. $1.6 billion);
--Industrial: 3.57% ($851.3 million vs. $186.2 million).

With rising vacancy rates and falling rents, the CMBS delinquency rates will keep rising; Fitch estimates the rate will rise until 2012.

This is related to these recent commercial real estate stories:

On offices from Reuters: At 17 pct, US office vacancy rate hits 15-year high

On apartments from Reuters: U.S. apartment vacancy rate hits 30-year high

On malls from Reuters: US shopping center vacancies hit records - report

For hotels, the occupancy rate has fallen to the lowest level since the Great Depression.

by Calculated Risk on 1/11/2010 09:00:00 AM

From Bloomberg: Dubai’s First Foreclosure May Open Floodgates in Worst Market (ht Nanoo-Nanoo, Steve)

Dubai’s housing rout sent prices down 52 percent in the past year, prompting some homeowners to abandon their cars and mortgage payments and flee the country. Not one received a foreclosure notice.

Until now.

Barclays Plc won the sheikdom’s first foreclosure cases in court, clearing the way for lenders holding about $16 billion of Dubai home loans to take action when borrowers don’t pay.
...
Moody’s estimated in September that 12 percent of the 27,000 residential mortgages in the sheikdom would default within 12 to 18 months.

Banks and developers until now have avoided the process of reclaiming homes through the courts, barred by tradition and an arcane legal process that few understood. The Barclays and Tamweel cases may change that ...

It is amazing that this is the first foreclosure given all the skips (expats fleeing the country to avoid debtor prison). But Dubai has lacked a clear legal process to handle foreclosures. As reader Steve joked, it is not so much "walk away" in Dubai but "fly away" defaults.

by Calculated Risk on 1/11/2010 12:15:00 AM

From Bloomberg: Fed’s Bullard Says Asset-Purchase Adjustments Main Policy Issue (ht MrM)

[St. Louis Fed President] James Bullard said the main challenge for U.S. policy makers will be to adjust the asset-purchase program ...

The Fed should retain flexibility by adopting a “state- contingent” policy that would allow for the adjustment of such purchases as new information becomes available ... He said it was “disappointing” that markets focus more on interest rates instead of the Fed’s quantitative monetary policy.
...
“Markets are still thinking of monetary policy strictly as changes in interest rates even though the Fed has been conducting successful policy this past year through quantitative easing,” Bullard said. “Markets should be focusing on quantitative monetary policy rather than interest rate policy.”

It is pretty clear that the Fed will not raise rates any time soon.

by Calculated Risk on 1/10/2010 09:28:00 PM

Note: Here is a weekly summary and look ahead.

Evelyn Nieves at HuffingtonPost has an update on Stockton, CA: Stockton, California Is Foreclosureville, USA, Has One Of The Worst Foreclosure Rates In The United Sates. A short excerpt:

Stockton is a changed place. Whole neighborhoods have been decimated by the mortgage disaster. The tax base has shrunken. City services and municipal jobs have been cut. Unemployment hovers at about 16 percent. Economists predict it will take years for Stockton to recover from the housing bust.
...
Housing developments built for commuters have been hit the hardest, since they were the ones to attract newcomers fleeing the huge spike in prices closer to the Bay area. Those whose livelihoods depend on a healthy housing environment – real estate brokers, contractors, day laborers – are barely holding on here.
...
The heart of Foreclosureville, U.S.A. – the Stockton subdivision that had more bank repossessions than any other place in the country for much of the last two years – is starting to look like its old self again.

The "For Sale" signs that overwhelmed Weston Ranch are mostly gone, and the lawns where weeds grew like corn stalks are shorn.

Foreclosure businesses that sprang up, including one that spray-painted brown lawns green and another that offered a foreclosure bus tour, have folded. Every time a foreclosure hits the market, bargain hunters snap it up.

But looks are deceiving. In Weston Ranch, financial devastation struck like a natural disaster and the ground has not yet settled. Speculators are buying houses to rent out. On streets where everyone knew everyone, no one knows anyone.

A long way from normal ...

by Calculated Risk on 1/10/2010 06:28:00 PM

Note: Here is a weekly summary and look ahead.

The Hartford Courant quoted Boston Fed President Eric S. Rosengren as saying he expects mortgage rates to rise 50 to 75 bps when the Fed MBS purchase program ends.

And that is an excuse to update the status of the program. From the Atlanta Fed weekly Financial Highlights:

Click on graph for larger image.

From the Atlanta Fed:

[T]he agency-backed MBS purchase program is ... on
schedule, with more than $1.1 trillion purchased by year-end.

The Fed purchased a net total of $9.3 billion of agency-backed MBS through the week of December 30. This brings its total purchases up to $1.115 trillion, and by the end of the first quarter 2010 the Fed will purchase $1.25 trillion (thus, it is 89% complete).

The Fed purchased an additional $12 billion net in MBS over the last week, bringing the total to $1.127 trillion or just over 90% complete.