I found out CMBS delinquencies hit 7% last week and I had no idea

Was reading a Trepp report and saw that commercial mortgage-backed securities delinquencies jumped to 7% in August, which is way higher than I expected given all the talk about rates cooling off - are we heading for a wave of defaults or is this just a lagging indicator that doesn't tell the whole story?

2 comments

2 Comments

the_charlie10d agoMost Upvoted

Drove past a downtown office tower in my city last week. 70% empty parking lot at 11am on a Tuesday. Same building had a Starbucks close inside it a month ago. You see this stuff everywhere now if you pay attention. Not just the big cities either. Small towns have strip malls with three units vacant and a fourth hanging on as a vape shop. The 7% number is just the official scorecard for a game that's been over for a while in real life.

samward10d ago

You said "way higher than I expected given all the talk about rates cooling off" and that's exactly what gets me. I think people are forgetting that cooling off doesn't mean rates drop fast enough to save the buildings that already got screwed. The lagging indicator thing is real (everything in CRE is slow to show up), but 7% is still a big number. We're talking about office buildings especially where occupancy is still way down, and those loans are just now hitting their maturity dates. So yeah, it's a lagging indicator, but it's also telling us that the pain hasn't even peaked yet. If rates stay where they are for another six months, I bet we see 10% or more before things stabilize.