Delinquencies in California’s commercial real estate market hit a 5-year low, in contrast to the residential market that is reeling with a record number of defaults.
In a quarterly report issued today by the California Mortgage Bankers Association, .03 percent of all loans were in foreclosure. The figure is the lowest since June 2002 when it dropped to .01 percent, and significantly below the 13 percent recorded in March.
The loan total included in the survey was $88.2 billion.
“Basically, it’s the economy,” said Peter Ulrich, a consultant for the state association and a retired mortgage banker. “If you follow vacancy rates in the various sectors, vacancies are down. That means the properties are performing well, the income stream is steady and it allows the owners to make their payments.”
A different story is unfolding in the residential market. Last month, DataQuick Information Systems reported that a total of 1,275 default notices were sent to Santa Clara County homeowners in the second quarter, up 20.5 percent from the first quarter of 2007, and 140.6 percent from the April-to-June period in 2006.
While numbers are higher elsewhere in the state, Santa Clara County is in step with the rest of California. Defaults rose statewide to an 11-year high, climbing 158 percent from a year earlier.
“On the residential side, some of the underwriting (loan) standards were compromised,” Ulrich said. “And that’s not true on the commercial side, which learned their lessons in the 1980s with the savings and loan scandals. The commercial loans not as liberal as they were back in the ’80s.”
The survey conducted by the state association at the end of June included $88.2 billion of mortgage loans serviced by 17 mortgage banking firms. Among the sectors studied – multi-family, office, retail, warehouse, hospitality, mobile home parks and research-and-development properties – only the hospitality and health care industries have delinquent loans. Hospitality has $12.1 million in delinquent loans, and health care recorded $13.7 million in delinquencies.
Mortgage payments are up to date in all other sectors. A loan is considered delinquent if the mortgagee is two or more payments late.
