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Construction Loan Defaults Jump in Q1

OAKLAND, CA-Though final figures are still one month away, earnings reports and call report filings from several banks point to another big jump in construction loan defaults nationally.

By Brian K. Miller | Updated on April 30, 2008

OAKLAND, CA-Construction loan delinquency rates appear to have increased substantially since the end of the year. Though final figures are still one month away, earnings reports and call report filings from several banks point to another big jump in defaults nationally, according to Foresight Analytics, a locally-based firm that provides real estate market analysis and forecasting for institutions, lenders and developers.

Total construction loan delinquencies shot up to an estimated 7.1%, up from 5.0% in the fourth quarter, eclipsing the previous high, 5.1%, registered at year-end 1994. The non-accrual rate—construction loans for which banks have stopped accruing interest because they don’t expect the debtor to get back on track—also rose sharply during the quarter, to an estimated 4.4%, more than quadruple the rate during the first three months of last year.

Foresight principal Matthew Anderson tells GlobeSt.com the housing market meltdown accounts for the rapid deterioration in construction loan performance, and will likely drive delinquencies higher during 2008. Indeed, the figures may actually understate the problem, he says.

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