Defaults on apartment building mortgages held by U.S. banks climbed to a record 4.6% in the first quarter, almost twice the year-earlier level, as more borrowers failed to repay debt approved near the market peak, said Real Capital Analytics Inc. in a report.
Defaults on so-called multifamily mortgages rose from 4.4% in the fourth quarter and from 2.4% during the same period in 2009, the New York real estate research firm said Monday.
Commercial mortgage defaults also rose in the first quarter for loans against office, retail, hotel and industrial properties, Real Capital said.
"Apartment defaults are leading other commercial real estate," Sam Chandan, global chief economist at Real Capital, said in an interview.
"Banks tended to make more aggressively underwritten apartment loans earlier during this last cycle. Credit and pricing reached their peaks for office properties and other commercial assets later," Chandan said.
The global recession cut demand for U.S. apartments, office space, retail shops, hotels and warehouses during the past two years as jobs disappeared and consumers cut spending.
Defaults on apartment building mortgages have surpassed the previous record, set in 1993, for the past three consecutive quarters.
The savings and loan crisis drove apartment building defaults to 3.4% in 1993.
Defaults on other types of commercial property debt peaked at 4.6% in 1992, according to Real Capital.
The proportion of defaults on office, retail, hotel and industrial properties rose to 4.2% in the first quarter of this year, the company said.
U.S. apartments may lead a rebound in commercial real estate as vacancies peak in 2010 and the economy adds jobs, the property research firm Reis Inc. said Wednesday.
Reis estimates apartment vacancies will peak at 8.2% in 2010, the highest level since the firm began tracking the number in 1980. The number should start to decline in 2011, Reis said.
Real Capital bases its analysis on bank filings and data from the Federal Deposit Insurance Corp.