Commercial Mortgage Backed Securities Drop 95 Percent in 2008
If you are wondering why commercial real estate that was going so strong in 2007 and early 2008 crawled to a snails pace, just look at the commercial mortgage backed security market.
Or try to find it. Or try to find any commercial lending.
Unless you are married to a banker and have pictures, finding lending is next to impossible. A big part of that is commercial paper was being securitized just like the residential market. And in 2008 that market dried up to the tune of 95% less securitized lending compared to 2007.
Ouch.
So projects that were green-lighted and funded in 2007 are wrapping up but there is nothing left in the pipelines. Add to that a global recession and now you understand why the commercial market has slowed to a crawl.
Lending has dried up as $171 billion of commercial mortgages come due this year, according to the Mortgage Bankers Association. Issuance of commercial mortgage-backed securities, which supply cash for bankers to make more loans, fell 95 percent in 2008, JPMorgan Chase & Co. reports. Geithner wants to expand an existing federal lending program to buy the securities and spark loan-making.
“CMBS is a four-letter word,” said William Acheson, who tracks apartment real estate investment trusts for the Benchmark Co. LLC in New York. “The Treasury plan gets questionable paper off questionable financial institutions’ books, but it will take an awful lot more confidence for people to come back to securitized mortgage pools.” via Bloomberg.com
One side note.
There are many people in the construction business chasing very little work these days. If you have a project that needs to be done, ask around. I promise you there are lots of families that would appreciate a side job or two to help put food on the table and pay their mortgages.
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Comment by Atlanta commercial property on 17 February 2009:
People in this country don’t realize the importance of this staggering number. 95% means a virtual stand-still. A brick wall, and 0 growth out of the commercial real estate sector. In Atlanta, as with most of the US, we have 100s of half finished commercial projects scattered across the cities and metro area. I would imagine that funding is one of the main reasons.
Comment by lance shutter on 19 February 2009:
The investors always seem to focus on the larger market areas which major growth and perhaps need to look at smaller more stable markets, prices are less but returns higher with less risk and competition.
Comment by Bennis Horrena on 24 March 2009:
porkulus is a waste of money, its a soft tyranny