SMF Pro Traders were told about the problems in the commerical real estate market a year ago. We are now seeing commerical real estate developers looking for a bailout.
WSJ reports delinquencies on mortgages for hotels, shopping malls and office buildings were sharply higher in the fourth quarter, as the weaker economy hit landlords and threatens to cause losses for investors in the $3.4 trillion market. Commercial real estate has held up better than the housing market, but began to struggle at the end of last year. New data from Deutsche Bank show that delinquencies on commercial mortgages packaged and sold as bonds, which represent nearly a third of the commercial real-estate debt market, nearly doubled during the past three months, to about 1.2%. The figure includes mortgages that are 30 days or more past due and in foreclosure. The delinquency rate will likely hit 3% by the end of 2009, its highest point in more than a decade, says Richard Parkus Deutsche Bank's head of research on such bonds, known as commercial-mortgage-backed securities, or CMBS. "Throughout this year, we're going to continue to see a significant acceleration of problem loans," he says. "CMBS prices already have priced in a far greater delinquency rate on the underlying loans." Delinquencies on commercial-real-estate loans held by banks and thrifts, which are big holders of this debt, also have risen strongly and many cos have suffered losses. According to research co Foresight Analytics, soured commercial mortgages on banks' books jumped to 2.2% as of the third quarter of last year, from 1.5% at the end of 2007. The research co estimates that the rate could rise to 2.6% in the fourth quarter of 2008.
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