Alarm Bells Are Ringing

...and the commercial real estate sector continues to crumble.

Commercial mortgage delinquencies in the U.S. climbed to the highest level in at least 11 years in April as scarce credit made it difficult for landlords to refinance loans, according to property research firm Trepp LLC.

The percentage of loans 30 days or more behind in payments rose to 2.45 percent, Trepp LLC said in a report. The delinquency rate was more than five times the year-ago number, Trepp said. The New York-based researcher’s records go back to 1998.

“It’s about as bad as it’s ever been,” said Thomas Fink, a Trepp senior vice president. “I don’t think we’re done yet. Where it’s going to top out, I don’t know, but we’re not done.”

The market for securitized commercial mortgages, which helped fuel an 88 percent rise in U.S. commercial property prices between 2001 and late last year, shut down in 2008 as financial institutions racked up losses and asset writedowns of more than $1.38 trillion related to residential mortgage defaults. Commercial property values fell 21.5 percent through February from their October 2007 peak, according to Moody’s Investors Service.

Properties bought in 2006 are now worth on average 11 percent less than their original price, and those bought in 2007 are worth almost 20 percent less, Moody’s said.

Trepp’s 30-day delinquency rate remained under 1 percent from October of 2005 to last November.

Commercial real state prices have a long, long way to fall, folks. These real estate assets are on the books of America's companies and disintegrating in value. When your company owes more on the building than the building is worth, you're in trouble. You can go underwater on your property in the buisiness world, too.

And all that will do is continue to hurt the economy.