Headlines – Week of April 22, 2012

April 30, 2012

CMBS Delinquencies Rise Sharply in March

According to Trepp, loan delinquency rates for securitized loans turned sharply up in March, climbing 31 basis points to 9.68%, after reaching a 12-month low in February.

Multi-family continues to be the weakest asset class in terms of loan delinquency: the asset class’s delinquency rate spiking 74bps to 15.39%. Retail, office and industrial delinquency also climbed in March, with retail being strongest overall performer at 8.24%, up 24bps from February. Lodging was the one asset class that showed month-over-month improvement, dropping 42bps to 10.63%.

One metric some analysts have been watching closely is the rate of defaults among 5-year loans. Many of these loans were written at the top of the 2007 peak and are current but are at risk of maturity default.

Trepp reported recently that only 48% of five-year loans that matured in Q1 of 2012 were paid off at par or otherwise resolved by the servicers. That means that 52% of those recently maturing loans are currently in maturity default and, among those, roughly 50% by Trepp’s reckoning are characterized as  “performing balloon” loans. I

It is these performing balloon loans that are fueling the demand for rescue equity capital and/or loan modifications structured with the goal of giving borrowers a bit more runway to resolve their leverage challenges.

 

2012 Home Sales will be strong in 2012

The National Association of Realtors is predicting existing-home sales will jump 7 to 10 percent in 2012 to the highest level in five years, based on an “uneven but higher sales pattern” so far this year.

Pending home sales fell a seasonally adjusted 0.5 percent from January to February, which was up 9.2 percent from the same time a year ago according to NAR.

Last week, NAR reported a similar trend for existing-home sales, which were down 0.9 percent from January to February, but up 8.8 percent from a year ago.

The pending sales data provides a glimpse into more recent trends, because it tracks homes that were under contract in February — deals that will in most cases be finalized within one or two months.

NAR said 31 percent of Realtors experienced contract failures in February, in some cases because buyers’ mortgage applications were rejected or because appraisals came in below the negotiated price.

In the Northeast, NAR’s index slipped a seasonally adjusted 0.6 percent from January but was up 18.4 percent from a year ago.

The Midwest saw a month-over-month gain of 6.5 percent and a 19 percent gain from a year ago.

Pending home sales fell 3 percent in the South from January to February, but were up 7.8 percent from a year ago.

In the West, the index declined 2.6 percent from January to February and was 1.8 percent below the index rating in February 2011.

In its latest economic forecast, NAR predicts existing-home sales will total 4.65 million in 2012, up 9.1 percent from last year. That forecast assumes that the U.S. economy will grow at a 2.3 percent annual rate and add 2.7 million jobs this year.

Posted by Scott R. Lodde

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