Multi Housing News November 2011 : Page 16

market pulse Multifamily Default Rates for Banks Defaults on Commercial Real Estate Mortgages Held by Depository Institutions 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% Multifamily Commercial Commercial 2008 Q3 1.37 Q4 1.64 2009 Q1 2.26% Q2 2.91 Q3 3.43 Q4 3.85 2010 Q1 4.20% Q2 4.30 Q3 4.36 Q4 4.28 2011 Q1 4.30% Q2 4.05 3.63% 3.33 Dollar Volume of Delinquent Loans Decline • The combined default rate on commercial and multifamily loans fell to 3.93 percent in the second quarter. The 26-basis point drop is the larg-est quarter-to-quarter decline this cycle. • The dollar volume of multifamily and commercial real estate loans in delinquency and default declined by $6.7 billion, to $61.2 billion, also the largest decline this cycle. • The default rate on construction loans fell by 100 points, but remains exceptionally high at 15.01 percent. Q3 ’08 Q4 Q1 ’09 Q2 Q3 Q4 Q1 ’10 Q2 Q3 Q4 Q1 ’11 Q2 • The management of distress remains a serious challenge, particularly for banks in smaller markets where values have been slower to recover. • An increasing share of banks is reengaging with the market, in making multifamily loans in particular. Overall, however, banks are still drawing down their exposure to income-producing property. The outstanding balance of banks’ multifamily and commercial real estate loans fell by just under $4.0 billion in the second quarter. —Sam Chandan Sources: FDIC, Bank Call Reports, Chandan Economics 4.65% 4.52 4.67 3.74 2.43% 3.13 3.60 4.43 1.47 1.77 Multifamily Multifamily Financing Volume Originations by Mortgage Bankers 120 150 30 60 90 0 Q2’09 Q3 Q4 Q1’10 Q2 Q3 Q4 Q1’11 Q2 Market Pulse section compiled by Keat Foong, executive editor. To comment, email kfoong@multi-housingnews.com. 16 November 2011 | Multi-Housing News Origination Volume Index (2001 Avg Qtr = 100) Multifamily 2006 2007 2008 132 Q1 Q2 143 166 180 195 113 2009 51 89 2010 49 2011 98 67 143 Source: Mortgage Bankers Association Percent Change Q3 Q4 Q2 to Q2 155 238 176 220 123 9% 18% 83 101 -42% 74 77 -21% 138 -25% 114% Origination Volume Index 4.30% 3.63% 4.05% 3.33%

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