DELINQUENCY AND DETERIORATION

The multifamily sector has the most dramatic delinquency acceleration among all commercial property types. The current delinquency rate of 3.53% far exceeds previous peak of 2.35% in Oct 2005. Therefore, the existing number of receiver and trustee market is not equipped for the number of properties entering the delinquent/default market.

As the current economic downturn continues, markets are witnessing an unprecedented decline in net rental rates; with increases in vacancy and concessions. Tenants are also becoming more value-oriented and increasingly focusing on absolute rent payments. The impact is spreading across all asset classes and across the nation.

The rate of commercial foreclosure was approximately 1% during 2008 and is expected to hit 3% this year - the highest point in more than a decade.  According to many experts, the tipping point will be between 4 and 5 percent.

CMBS/CDO’s hold the second largest share of non-construction related commercial/multifamily debt behind GSE’s, and their 30-plus day delinquencies increased from 0.08% to 1.85% during 1Q 2009.

Multifamily foreclosure rate jumped to 3.5% in January 2009 from under 1% in January 2008.
 

 Multifamily Delinquency Rates
(43 bps MONTHLY increase from Oct 2008)

                                                                                                                      Source: DB

2006/2007 Vintage Originations
Multifamily Delinquency Rates

                                                                                                                Source: Trepp