Delinquencies for U.S. commercial mortgage-backed securities (CMBS) increased slightly during the second quarter, according to Fitch Ratings. The delinquency index rose from 1.53% in the first quarter of 2004 to 1.56% in the second quarter of 2004.
“The three basis-point increase is attributable to increases in multifamily, retail and office loans over the period,” says Mary O'Rourke, senior director for Fitch Ratings.
At the end of the first quarter, Fitch had predicted that delinquencies in those three property sectors would continue to increase. If loans securitized after June 2003 are removed from the sample, the delinquency rate actually rises to 1.84%.
“The largest increase was in the multifamily sector,” says O'Rourke. “Rising interest rates will stem the flow of multifamily tenants to the single-family market, although overbuilding in certain markets such as Atlanta, Dallas and Las Vegas is likely to keep the multifamily delinquency rate on the rise for a while.”
Fitch also forecasts a rise in retail loan delinquencies over the next three to four quarters as consumer spending declines and interest rates rise.
Hotel and industrial loans showed decreases in delinquencies, an optimistic sign that some parts of the economy are experiencing recovery. However, the industrial sector appears to be vulnerable to the inconsistent economic news being reported on job growth and corporate capital investment. As a result, Fitch doesn’t anticipate a significant increase in industrial occupancy rates until a sustained period of employment growth takes effect and orders for durable goods increase.