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 In this Issue:
 Commercial Delinquencies End 2007 Near
Record Lows
M/F
Sector Remains Strong As Single-Family Market Suffers
NAHB Reports Decline in Condo Builder
Confidence
Commercial
Delinquencies End 2007 Near Record Lows
The Mortgage Bankers Association (MBA) released
its inaugural analysis of Commercial/Multifamily Mortgage
Delinquency Rates for Major Investor Groups that shows delinquency
rates ended 2007 at or near record lows for most major investor
groups. Fourth quarter delinquency rates for four of the five
largest investor groups - commercial mortgage-backed securities
(CMBS), life companies, Fannie Mae and Freddie Mac - remained at or
near historically low levels. For the fifth group, FDIC-insured
commercial banks and thrifts, delinquency rates were lower at
2007's year-end than during 5 of the previous 11 years and 10 of
the previous 16 years.
"This is an important new analysis that helps
cut through much of the recent 'noise' on commercial real estate
finance," said Steve Graves, Managing Director & Chief
Operating Officer of Principal Real Estate Investors and Chair of
the Mortgage Bankers Association's Commercial Board of Governors.
"Despite a great deal of attention being paid to economic
uncertainty, it is reassuring to know that the performance of
commercial and multifamily mortgage loans and bonds has remained so
fundamentally sound."
The new MBA analysis looks at
commercial/multifamily delinquency rates since 1996 and compares
year-end rates for the five largest investor-groups: commercial
banks and thrifts, commercial mortgage-backed securities (CMBS),
life insurance companies, Fannie Mae and Freddie Mac. Together
these groups hold more than 80 percent of commercial/multifamily
mortgage debt outstanding.
"The analysis incorporates the same measures
used by each investor group to track the performance of their
loans," said Jamie Woodwell, Senior Director of
commercial/multifamily research at the Mortgage Bankers
Association. "While the numbers aren't comparable across
different investor groups, within each group they show a common
theme - for nearly every investor group, commercial/multifamily
loans are currently performing at some of the strongest levels on
record."
CMBS delinquency rates at year-end 2007, for
example, were lower than those at year-end of 9 of the previous 10
years. Life companies finished 2007 with a delinquency rate lower
than at year-end of all 11 of the pervious 11 years. Fannie Mae
finished with a rate equal to or lower than 10 of the previous 11
years. Freddie Mac finished with a rate lower than 10 of the
previous 11 years. And FDIC-insured banks and thrifts finished the
year with a delinquency rate lower than 5 of the previous 11 years.
Each investor group tracks delinquencies in its
own way, meaning delinquency rates are not comparable from one
group to another. Based on the unpaid principal balance of loans
(UPB), delinquency rates for each group at the end of the fourth
quarter were as follows:
• CMBS: 0.40 percent (30+ days delinquent or
in REO);
• Life company portfolios: 0.01 percent (60+days delinquent);
• Fannie Mae: 0.08 percent (60 or more days delinquent);
• Freddie Mac: 0.02 percent (60 or more days delinquent);
• Banks and thrifts: 0.80 percent (90 or more days delinquent
or in non-accrual).
To put these numbers in context, of 34,937 commercial/multifamily
loans in life company portfolios, with a total unpaid principal
balance of $245 billion, only 9 loans with an aggregate UPB of less
than $19 million were 60+ days delinquent at the end of the
quarter. Of $1.2 trillion of commercial/multifamily loans at
FDIC-insured banks and thrifts, only $9 billion was 90+ days
delinquent.
Source: Mortgage
Bankers Association
M/F
Sector Remains Strong As Single-Family Market Suffers
While the single-family residential real estate
sector has suffered its worst downturn since the Great Depression
and a 10-month backlog of supply, the apartment sector is booming,
according to the National Multi Housing Council's (NMHC) latest
Market Trends report.
Apartment owners kept their supply levels in check
during the housing boom, and therefore have not been plagued by the
same oversupply problems as the single-family sector. As a result,
rents have shown slight increases even as the prices of
single-family homes continue to fall precipitously.
Last year, the number of renters in professionally
managed apartments increased by an amount as large as that for the
previous five years combined. Between 2004 and 2006, 1.2 million
households became renters, making up for the loss in renter
households experienced from 2002 to 2004.
The long-term outlook for the rental industry
remains strong. The number of renters across the United States
is projected to increase by almost 4 million households over the
next 10 years, with half of those households likely to rent
apartments. With a steady supply of the nation's 75 million echo
boomers entering the market and strong immigration levels, the
demand for professionally managed apartments shows no signs of
waning anytime soon.
Source: National
Multi Housing Council
NAHB Reports Decline in Condo Builder
Confidence
The National Association of Home Builders (NAHB)
reported a disappointing Multifamily Condo Market Index (MCMI) of
18.8 for the year ending December 2007. The index, which tracks
builder confidence in current conditions*, declined 11 points from
the same time a year ago and reflects the ongoing struggle in the
condo market since it reached its peak during the housing boom.
In the fourth quarter of 2007, builder
expectations for the next six months were measured at 29.2,
compared to a much more optimistic measure of 49.1 in the fourth
quarter of 2006.
Builders also responded to a series of special
questions that accompanied the MCMI survey of the fourth quarter:
- 28% of respondents
reported higher or somewhat higher sale cancellation rates in
the fourth quarter of 2007 compared to a year earlier. The
average sales cancellation rate was 19 percent.
- About two-thirds of
builders reported lowering prices to increase revenue. The
average price reduction was 11 percent.
When asked about the marketing strategies they
used to increase sales, more than 70 percent of builders reported
including optional items at no cost, paying closing costs or fees
or absorbing financial points for their buyers.
*Responses are rated on a scale of 0 to 100, with
a rating of 50 generally indicating that the number of positive
responses is about the same and the number of negative responses.
Source: National
Association of Home Builders
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