Apartment sector has highest loan-default rate.THE APARTMENT SECTOR tops all U.S. commercial real estate in having the highest loan default rate, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. real estate data analyst firm Trepp LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control . [ILLUSTRATION OMITTED] In May, defaulted apartment loans that back commercial mortgage-backed securities (CMBS CMBS See: Commercial Mortgage Backed Securities ) surpassed the 5 percent mark, while retail and hotels eclipsed the 3 percent level. Real Estate Econometrics adds that bank loans for apartment communities defaulted at a rate of 2.45 percent in this year's second quarter, while those of all other commercial property mortgages held by depository institutions topped 2.25 percent. According to Real Capital Analytics, apartment community prices peaked in the last three months of 2006. Peak prices for other classes of real estate followed throughout 2007. Real Estate Econometrics President Sam Chandan notes, "Because [apartments] peaked first, some of the deterioration has come on a little earlier." Declining rents and occupancies, coupled with fewer available loans, have dropped values between 35 percent and 40 percent. This, in turn, has resulted in higher defaults. The struggling national economy, meanwhile, has negatively impacted job growth--a key driver in the demand for apartments. This is affecting all levels of the apartment sector. Higher-end rental units, for example, are no longer commanding top prices in many markets simply for their amenities. According to a June 19 report by Investor's Business Daily Investor's Business Daily (IBD) is a national newspaper in the United States, published Monday through Friday, that covers international business, finance, and the global economy. Founded in 1984 by William O'Neil, its headquarters are in Los Angeles, California. , Caldera caldera: see crater. caldera Large, bowl-shaped volcanic depression that forms when the top of a volcanic cone collapses into the space left after magma is ejected during a violent volcanic eruption. The term is Spanish for “caldron. Asset Management President Mike Kelly This article is about the newspaper columnist. For the baseball player, see Mike Kelly (baseball). Mike Kelly is a columnist for the The Record, a newspaper serving Bergen County, New Jersey. observes, "Most renters are paying for value. They're not going to pay an extra 50 bucks because you have a cabinet in granite." Source: Investor's Business Daily |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion