Connect with us

Markets

Commercial Mortgage Delinquencies Near Record Levels

Published

on

Commercial Mortgage Delinquencies Near Record Levels

Can I share this graphic?
Yes. Visualizations are free to share and post in their original form across the web—even for publishers. Please link back to this page and attribute Visual Capitalist.
When do I need a license?
Licenses are required for some commercial uses, translations, or layout modifications. You can even whitelabel our visualizations. Explore your options.
Interested in this piece?
Click here to license this visualization.

Commercial Mortgage Delinquencies Near Record Levels

Delinquency rates across commercial properties have shot up faster than at any other time.

As thousands of restaurants, hotels, and local businesses in the U.S. struggle to stay open, delinquency rates across commercial mortgage-backed securities (CMBS)—fixed income investments backed by a pool of commercial mortgages— have tripled in three months to 10.32%.

In just a few months, delinquency rates have already effectively reached their 2012 peaks. To put this in perspective, consider that it took well over two years for mortgage delinquency rates to reach the same historic levels in the aftermath of the housing crisis of 2009.

The above chart draws data from Trepp and illustrates the recent shocks to the CMBS market, broken down by property type.

Storm Rumblings

While there is optimism in some areas of the market, accommodation mortgages have witnessed delinquency rates soar over 24%.

Amid strict containment efforts in April, average revenues per room plummeted all the way to $16 per night—an 84% drop.

Property TypeJanuary 2020June 2020
Accommodation1.5%24.3%
Retail3.8%18.1%
Multifamily2.0%3.3%
Office1.9%2.7%
Industrial1.6%1.6%
Overall2.1%10.3%

Similarly, retail properties have been rattled. Almost one-fifth are in delinquencies. From January-June 2020, at least 15 major retailers have filed for bankruptcy and over $20 billion in CMBS loans have exposure to flailing chains such as JCPenney, Neiman Marcus, and Macy’s.

On the other hand, industrial property types have remained stable, hovering close to their January levels. This is likely attributable in part to the fact that the rise in e-commerce sales have helped support warehouse operations.

For multifamily and office buildings, Washington’s stimulus packages have helped renters to continue making payments thus far. Still, as the government considers ending stimulus packages in the near future, a lack of relief funding could spell trouble.

Weighing the Impact on U.S. Cities

How do delinquency rates vary across the top metropolitan areas in America?

Below, we can see that the delinquent balance and delinquency rates vary widely by city. Note that this data is for private-labeled CMBS, which are issued by investment banks and private entities rather than government agencies.

U.S. Cities CMBS Delinquency Rates

Despite the New York city metropolitan area having a delinquent balance of $7 billion, its delinquency rates fall on the lower end of the spectrum, at 7%. New York alone accounts for 18% of the total balance of private-label CMBS.

By comparison, the Syracuse metropolitan area has an eye-opening delinquency rate of 69%. Syracuse is home to the shopping complex, Destiny USA, which is facing tenant uncertainties due to COVID-19. The six-story mall attracts 26 million visitors annually.

Like the overall market, delinquencies are being driven by accommodation and retail properties across many of these U.S. metropolitan areas.

What Comes Next

What happens when delinquency rates get too high?

Often, when borrowers do not make payment after a reasonable amount of time, they enter into default. While time ranges can vary, defaults typically take place after at least 60 days of nonpayment. Between May and June, defaults in the CMBS market surged 792% to $5.5 billion.

As effects reverberate, properties could eventually fall into foreclosure. At the same time, institutional investors who own these types of securities, which include pensions, could begin seeing steep losses.

That said, the Federal Reserve has set up mechanisms to purchase CMBS loans with the highest credit quality. This is designed to inject liquidity into the mortgage market, while also financing small and mid-sized properties that house small businesses. In turn, this can enable the employment of millions of Americans.

Of course, it remains to be seen whether the mortgage market will face a sustained downturn akin to the financial crisis, or if the temporary decline will soon subside.

Click for Comments

Markets

Will Tesla Lose Its Spot in the Magnificent Seven?

We visualize the recent performance of the Magnificent Seven stocks, uncovering a clear divergence between the group’s top and bottom names.

Published

on

Will Tesla Lose Its Spot in the Magnificent Seven?

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

In this graphic, we visualize the year-to-date (YTD) performance of the “Magnificent Seven”, a leading group of U.S. tech stocks that gained prominence in 2023 as the replacement of FAANG stocks.

All figures are as of March 12, 2024, and are listed in the table below.

RankCompanyYTD Change (%)
1Nvidia90.8
2Meta44.3
3Amazon16.9
4Microsoft12
5Google0.2
6Apple-6.7
7Tesla-28.5

From these numbers, we can see a clear divergence in performance across the group.

Nvidia and Meta Lead

Nvidia is the main hero of this show, setting new all-time highs seemingly every week. The chipmaker is currently the world’s third most valuable company, with a valuation of around $2.2 trillion. This puts it very close to Apple, which is currently valued at $2.7 trillion.

The second best performer of the Magnificent Seven has been Meta, which recently re-entered the trillion dollar club after falling out of favor in 2022. The company saw a massive one-day gain of $197 billion on Feb 2, 2024.

Apple and Tesla in the Red

Tesla has lost over a quarter of its value YTD as EV hype continues to fizzle out. Other pure play EV stocks like Rivian and Lucid are also down significantly in 2024.

Meanwhile, Apple shares have struggled due to weakening demand for its products in China, as well as the company’s lack of progress in the artificial intelligence (AI) space.

Investors may have also been disappointed to hear that Apple’s electric car project, which started a decade ago, has been scrapped.

Continue Reading

Subscribe

Popular