Commercial Mortgage Failure Rate Highest in 20 Years: Pace May Slow in Last Quarter
Although there has been some positive news regarding Boston real estate over the course of the past month or so, there has also been at least some mixed news as well. For example, the Wall Street Journal has now reported that U.S. banks are reporting the fastest rate of failure of commercial mortgages in the past twenty years.
The Journal indicated that by the end of 2009 the losses on commercial loans across the United States may reach approximately $30 billion. This estimate is based on reports from about 8,000 banks across the country earlier in 2009.
The commercial real estate market actually is a significant part of the United States economy. For example, it is estimated that health care comprises about 18 percent of the U.S. economy. At the same time, commercial real estate is about 13 percent of the economy of the United States. Commercial real estate across the United States is valued currently at about $6.7 trillion.
The commercial Boston real estate market has experienced defaults at about the same rate that is being experienced on average across the country. However, defaults in mortgage loans in the commercial Boston real estate market appear to be slowing. The slowing trend can be seen occurring in other cites in the United States as well.
On the positive side of the equation, many experts do agree that the default rate in the commercial Boston real estate market has reached the bottom and that this default rate will begin to slow, perhaps even slow quite significantly after the first of the year.
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