The second, third, or maybe Nth shoe to fall in the ongoing real estate crisis is commercial real estate -- offices, factories and to a certain extent rental apartments -- which tend to trail the owner-occupied housing market as leases end, jobs are lost, and businesses close (or recover). Alas, commercial real estate couldn't be much worse, according to a new report the commercial property research firm Trepp LLC.

Delinquencies on commercial-mortgage backed securities rose to 6.07 percent in December, from 5.65 percent in November and 1.21 percent one year ago. This is the highest delinquency rate ever recorded. The total value of the commercial mortgage-backed securities market was $724.5 billion in 2009. This is significantly smaller than the $5+ trillion market for securities backed by home mortgages, but $700+ billion is still a significant exposure for the U. S. economy and one that is going down, not up.
According to Trepp, there was a similarly high delinquency rate in the early 1990s because of overbuilding, but the current problems reflect large job losses since 2007 which have reduced the demand for office, retail, and residential space.

The U. S. apartment vacancy rate has increased to 8 percent -- the highest level in thirty years. As a result of this surplus, many landlords are also being forced to offer rent concessions. In 2009, apartment rents fell by an average of 2.3 percent.

So this is bad news for landlords and good news for renters.

That dynamic could shift as a surge of new renters flood the market from foreclosed properties. More than four million homes right now in default or foreclosure, and most of those families will become renters when they finally leave their homes.

Overall, these facts point to a very slow emergence from recession for the U. S. economy and housing markets. The recession may technically be over, but it sure doesn't feel that way, does it?