commercial real estate

Commercial real estate resumes rapid descent

The slight slowing of decline in early summer is over.

Commercial real estate prices…renewed steep declines and low transaction volume in July… The [Moody's/REAL Commercial Property Price Index] was down 5.1% from June after having declined by only 1% the prior month. It is now 30.8% below what it was a year earlier and 38.7% below the peak measured in October of 2007.

Commercial Real Estate Defaults Jumped Q2 2009, default rate projected to 5.4% 2011

Firstly, Commercial Real Estate delinquencies jumped in Q2 2009.

The delinquency rate on loans for 30 days or more held in commercial mortgage-backed securities rose 2.04 percentage points to 3.89 percent between the first and second quarters.

Then, the projected default rate, according to Bloomberg will be 5.4%.

The default rate on commercial mortgages held by U.S. banks will rise to 5.4 percent in 2011, the highest since at least 1992, as banks anticipate more losses amid falling rents, according to Real Estate Econometrics LLC.

The property research firm increased its projected default rates for 2009 to 2011 amid declining occupancies and incomes at hotels, shopping malls and office buildings.

Commercial real estate outlook is bad and getting worse

The size of the commercial real estate problem got a number today - $2.2 Trillion.

(Bloomberg) -- About $2.2 trillion of U.S. commercial properties bought or refinanced since 2004 are now worth less than the original price, raising the threat of more foreclosures, Real Capital Analytics said.

Prices have fallen so far that about $1.3 trillion of properties have either lost their owners’ down payment or are close to it, Robert White, president of the New York-based research firm, said in a report. The analysis includes only office, industrial, multifamily and retail properties. Hotels and raw land would “add billions more to the total,” he wrote.

The CBMS market about to implode

Since 2007, if not earlier, all the attention has been focused on the residential real estate troubles. But now the commercial real estate problems are about to come front and center.

In a research note today, Citigroup analysts estimated that "more than $75 billion of CMBS market capitalization has been lost" since the S&P request for comment on changes to their U.S. CMBS rating methodology was issued two days ago.

S&P noted:
Our preliminary findings indicate that approximately 25%, 60%, and 90% of the most senior tranches (by count) within the 2005, 2006, and 2007 vintages, respectively, may be downgraded.

New TALF program starts in June

The Federal Reserve just keeps getting in deeper and deeper to bail out their Wall Street bankster buddies.

The Federal Reserve announced Friday that it will launch a much-awaited program in June to bolster commercial real-estate lending.

And, to help make the program more attractive to investors, the Fed will provide longer, five-year loans.

Investors would use the money to buy securities backed by commercial real-estate loans.
"There's a looming crisis in commercial real estate whereby owners of shopping malls, hotels, rental properties and many other types of buildings are unable to refinance or to pay for new construction," Fed Chairman Ben Bernanke warned lawmakers on Capitol Hill in March.