Commercial Overdues Are Up, But Not as Much as Expected.

War, what is it good for? Now that the war in Iraq has ended quickly, resulting in oil prices going down, fears about the possible impact of a long, drawn-out war on the economy have also been allayed. The Federal Open Market Committee has cited this factor in its May 6 decision to keep interest rates unchanged at their current lows. According to the FOMC, "the ebbing of geopolitical tensions has rolled back oil prices, bolstered consumer confidence, and strengthened debt and equity markets." They also expect these developments to "foster an improving economic climate over time."

At this point, in what might well be close to the bottom of the current economic downturn, commercial mortgage delinquencies have not risen to the high levels some forecasters were expecting.

Even then, the rating agencies have seen a rise in delinquency levels for the first quarter and remain cautious about the rest of 2003.

Moody's sees "early signs of a bottoming-out process" for commercial property markets in its first-quarter CMBS report. The rating agency believes however that "delinquencies may still have some room to rise over the next few quarters as the economy and demand for real estate space remain soft." Through late 1999, the performance of all the asset classes were linked closely, Moody's says, with a spread of 1% or less on their delinquency rates. The rating agency is now seeing a trend of delinquency rates for health care and lodging properties separate and rise much higher from the rates for the "core" property types of multifamily, retail, industrial and office. For the major asset categories, there has been a steady rise in delinquency rates over the past few years that ...