by Calculated Risk on 8/04/2008 05:27:00 PM

From Reuters: Delinquent US property loans rise in June-Moody's

Delinquent U.S. commercial real estate loans rose in June ... according to a report from Moody's Investors Service released on Monday.

The percentage of outstanding property loans, including those that are in arrears at least 60 days and in foreclosure, was 0.45 percent, up 0.01 percentage point from May and up 0.21 point from a year ago, the bond rating service said.
...
The historical average delinquency rate on loans that support commercial real estate securities is 0.61 percent over the past 10 years, Moody's said.

There are two parts to the CRE bust: 1) less investment in non-residential structures, especially hotels, offices, and malls, and 2) rising delinquency rates for existing CRE. The first leads to less employment, the second to more write downs for lenders (and more bank failures since many small to mid-sized institutions are overexposed to CRE).

Added: Falling prices for CRE is part of #2. The impact on the economy from falling prices and rising delinquencies comes from write downs, tighter lending standards, and bank failures.

The delinquency rate is rising, but still pretty low.

At least no one will say "Hoocoodanode?" when rising CRE defaults lead to a number of bank failures:

Concentrations of commercial real estate exposures are currently quite high at some smaller banks. This has the potential to make the banking sector much more sensitive to a downturn in the commercial real estate market.
Fed Vice Chairman Donald Kohn, April 17, 2008

[A] number of banks have significant CRE concentrations, and the weakness in housing across the country may have an adverse effect on those institutions. Banks with CRE concentrations should take steps to strengthen their overall risk-management framework and maintain strong capital and loan loss allowances.
FDIC Chairman Sheila C. Bair, March 17, 2008