The CMBS delinquency rate for multifamily loans has reached nearly 9 percent and will likely soon balloon another 400 basis points.

In February, the apartment sector’s delinquency rate climbed to an all-time high 8.97 percent, according to Fitch Ratings. When factoring in the imminent delinquency of Stuyvesant Town/Peter Cooper Village, that rate will climb to more than 13 percent.

Still, Fitch believes that this year will likely serve as a turning point for the apartment market. The ratings agency expects the vacancy rate across the apartment sector to peak at 8.9 percent this year, while the unemployment rate is forecast to peak at 10.4 percent in mid-year.

But that doesn’t necessarily mean there will be a swift return to rent growth.

“While vacancy rates are expected to peak this year, rents will take longer to recover,” says Mary MacNeill, managing director of New York City-based Fitch Ratings. “Owners continue to offer significant concessions to maintain occupancy, we expect the unemployment rate to keep climbing in the near term, and immigration rates are declining.”

The peak years of the last cycle continue to haunt the multifamily industry. About a third of all newly delinquent loans in February were five-year loans originated in 2005. And if current trends are any indication, it’s only going to get uglier: loans originated from 2006 to 2008 account for more than 75 percent of all specially serviced loans by balance, according to Fitch.

Last year, special servicers resolved about $8.7 billion in CMBS loans, but they still have a huge backlog in the pipeline. That $8.7 billion represents just 11 percent of the universe of loans in special servicing, according to Fitch.  

While the multifamily delinquency rate is around 9 percent, not all markets are created equally. Nevada, Tennessee, and Florida all have the highest multifamily delinquency rates (around 20 percent), while Washington state, and Washington, D.C., are the healthiest markets, with less than 0.1 percent in CMBS delinquencies. Pennsylvania and New Jersey are also honorable mentions, with delinquencies below 2 percent.

The combined delinquency rate across all asset classes climbed 29 basis points to 6.29 at the end of February. The worst performing sector continues to be hotels, with a rate of 16.6 percent, while the office sector is doing best, at 3.5 percent.