Market Conditions: Construction Loan Delinquencies Soar
Crain’s reports on the second quarter construction loan delinquencies. The article includes a great chart showing the delinquency rates back to 2000.
The delinquency rate for construction loans in the Chicago area hit 10.8% in the second quarter, up from 8.4% in the first quarter and 2.6% in the year-earlier period, according to Foresight Analytics LLC, an Oakland, Calif.-based research firm. The national delinquency rate rose to 8.1%, up from 7.2% last quarter and 2.4% in second-quarter 2007.
“Unfortunately, I don’t see any quick turnaround in the residential sector, and there are certainly signs of weakness in the commercial sector,” says Foresight Partner Matthew Anderson.
Delinquent loans are defined as those past 30 days due. Under a narrower definition that defines delinquent loans as 90-days past due, the Chicago-area delinquency rate was 8.3% in the second quarter, the highest since the rate hit 8.0% in 1992, the earliest year for the data.
The article states that the depressed real estate market accounts for a majority of the delinquencies (even though commercial loans are also included in the data).
In many cases, lenders, seeking to avoid a long and costly foreclosure process, are allowing developers to refinance, but they’re demanding that the developers put up additional collateral, such as a personal guarantee or a second mortgage on another piece of property, says attorney Steven DeGraff, a principal at Chicago-based Much Shelist Denenberg Ament & Rubenstein P.C.
Meanwhile, the vultures are circling, looking to take over failed condo projects by buying defaulted loans at a deep discount. That day is coming, but it isn’t here yet, says Mr. DeGraff, who handles workouts of bad real estate loans.
Lenders “are not prepared to take huge discounts on properties they think still have real value,” he says. “They’re going to hold off as long as they can.”
Local construction loan delinquencies rise [Crain’s Chicago Business, Sep 2, 2008]
Down down down in a burning ring of fire
Not to be a pessimist, but I still think this is the tip of the iceberg…
The market has gotten so accustomed to bad news over the last 12 months that terrible news like this doesn’t seem quite so bad anymore.
…and the flames went higher. And it burns, burns, burns.
My bank financed a lot of residential rehabs in my neighborhood..few of which have sold….and now my bank is offering 4.0% CD’s…maybe it’s time to move my money!
ING offers a 4% CD as well.
For as much as you rail against the Bulls, your posts come off even more idiotic.
I can get a 4% CD at ING.
The rate isn’t extreme
It’s not extreme but that’s not the point. My bank obviously needs cash to cover its losses. A 4% cd is a much higher rate than it was offering a few months ago.