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Potential Problems In The Commercial Real Estate Market!

Monday, March 8, 2010

by Galand Haas

Good Monday Morning!

If you have not been to an Oregon Duck baseball game at the brand new PK Park you need to do so. What a fantastic facility this is and how much fun is it to watch a college baseball game? This is a great addition to the Eugene and Springfield area!

Most of the Real Estate news over the past several years has focused on the residential Real Estate market and it's continual slide both nationally and locally. The situation with the residential market has certainly had an effect on the lives of most. Now coming on the scene is a situation with commercial Real Estate that is going to also have a significant impact on most of us. Loans for commercial Real Estate are typically much shorter in term than those made for residential Real Estate. Most commercial loans have a duration of seven years. What we are seeing in both the local and national commercial Real Estate market is that lease rates are declining sharply. The value for commercial property is determined primarily by what the lease value is. As a result of the lower lease rates, the value of most commercial property has dropped significantly. Over the next 3 years hundreds of thousands of commercial notes are going to be coming due all over the country. As these notes come due the commercial property owners are going to have to find new financing. Due to the lower lease rates, many of these commercial properties values will be less than what is currently owed on them. The problem will come from the fact that the banks will not be able to loan on the buildings for the amount the owners need and historic numbers of commercial Real Estate owners will now go into default. This has the potential for a huge economic disaster as thousands of commercial property investors lose their money. The investor groups are broad as many of the nations largest insurance company's etc. are invested heavily in commercial Real Estate.

Have An Awesome Week!

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AND HERE'S YOUR MONDAY MORNING COFFEE!!

Sincerely,
Galand

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Monday Morning Real Estate Update 7/21/08

Tuesday, September 16, 2008

by Galand Haas

Galand Haas,

Good Monday Morning!

With banks such as Indi Mac failing, consumer confidence across the country is suffering. Now the problem with the Real Estate market is as much of a confidence problem as it is a problem of real economic conditions. This confidence problem has become evem more exaggerated with the recent rumblings that national Real Estate mortgage giants Fannie Mae and Freddie Mac are suffering from loan default problems as well. Within any economic cycle consumer confidence plays a huge role. I would think that the trends that we see in our local market will follow the confidence level of consumers nationally. So, watch closely what national economic experts predict , because that is most likely the path that our local market will follow during the months ahead.

Have An Awesome Week!

AND HERE'S YOUR MONDAY MORNING COFFEE!!

Sincerely,
Galand

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Real Estate mortgage market economic Indi Mac

Home Mortgage Trends 3/12/07

Monday, April 2, 2007

by Galand Haas

The Mortgage Bankers Association
According to the MBA's statistics approximately 11% of subprime loans are used by first-time homebuyers.
Last week MBA stated that "Today, homeownership stands at 69 percent because many people not able to get credit in the past have gotten the opportunity to borrow money. And, our data demonstrates that 87 percent of borrowers with subprime loans are paying their mortgages on time and enjoy the benefits of homeownership." MBA tracks 43.5 million loan database, including subprime, to track industry trends and statistics.
The Center for Responsible Lending
The Center for Responsible Lending points out that this means "loans in the subprime market are typically debt consolidation refinance loans and do not create new homeownership opportunities.
Loans that borrowers cannot afford do not lead to lasting homeownership. Comparing an 11% increase in homeownership with projected default rates of 19.4% for recent subprime loans; subprime lending appears to result in a NET LOSS of homeownership in its current form.
In addition, most borrowers who get subprime loans later refinance into new subprime loans, and many of these will also be foreclosed upon. Following the borrower through subsequent loans rather than just looking at that first loan, CRL roughly estimates in Losing Ground that actual subprime borrower foreclosure rates will be over 35%." CRL's research is based on the performance of more than six million subprime loans originated over a seven-year period.
Most sobering is the CRL prediction that "... one out of five (19 percent) subprime mortgages originated during the past two years will end in foreclosure. This rate is nearly double the projected rate of subprime loans made in 2002, and it exceeds the worst foreclosure experience in the modern mortgage market, which occurred during the 'Oil Patch' disaster of the 1980s."
Suggested Corrective Action
This past week, in testimony before the House, MBA Chairman John M. Robbins stated that "Working together, I suggest we must accomplish three things. (1) We must stabilize the subprime mortgage credit system; (2) provide assistance for homeowners facing foreclosure; and (3) finally prevent this from ever occurring again. Sound perspective and a prudent regulatory hand will soothe investors, calm editorial writers and help consumers."

Key Economic Reports Released This Week

RELEASE DATE	ECONOMIC INDICATORS	RELEASED BY	CONSENSUS	Wt.	INFLUENCE ON INTEREST RATES
Mon 04/02 10:00 am et	ISM (NAPM) Index for March '07	National Association of Purchasing Mgt.	51.2%	**	If above consensus If below consensus
Mon 04/02 1:00 pm et	Weekly Bill Auction	Dept. of the Treasury	N/A	**	If strong demand If weak demand
Tue 04/03	Motor Vehicle Sales for March '07	Automobile Manufacturers	Vehicles 16.5M	**	Undetermined
Wed 04/04 7:00 am et	MBA Mtg Apps Survey for week ending 03/30	Mortgage Bankers Association of America	N/A	*	Undetermined
Wed 04/04 10:00 am et	Factory Orders for February '07	Bureau of the Census Dept. of Commerce	2.0%	*	If above consensus If below consensus
Wed 04/04 10:00 am et	ISM Index (Non-Mfg) for March '07	National Association of Purchasing Mgt.	55.0%	**	If above consensus If below consensus
Thu 04/05 8:30 am et	Jobless Claims for week ending 03/31	Bur. of Labor Statistics Department of Labor	320K	*	If above consensus If below consensus
Fri 04/06 8:30 am et	Employment Report for March '07	Bur. of Labor Statistics Department of Labor	Payrolls 120K Unemp 4.6%	****	If above consensus If below consensus
Fri 04/06 10:00 am et	Wholesale Trade for February '07	Bureau of the Census Dept. of Commerce	0.4%	**	Undetermined
Fri 04/06 3:00 pm et	Consumer Credit for February ' 07	Federal Reserve Board	$5.0B	*	If above consensus If below consensus