Keep your arms and legs in the vehicle, riders....The Commercial Real Estate Ride is going down !!!!

[marmar]

The worst is yet to come
Commentary: What to expect from the commercial real estate crisis

By Josh Lipton


NEW YORK (MarketWatch) -- Over the next few years, a wave of commercial real estate loan failures could threaten America's already-weakened financial system.

So warns a new report from the Congressional Oversight Panel as part of its oversight of the Troubled Asset Relief Program, highlighting yet one more hurdle for this country's fragile economy.

The panel, chaired by Harvard law professor Elizabeth Warren, says it remains "deeply concerned" that commercial loan losses could jeopardize the stability of many banks, particularly the nation's mid-size and smaller banks.

Worries about CRE loans -- those loans taken out by developers to purchase and maintain shopping malls, offices, hotels, and apartments -- have been simmering for months, as we noted in an October article. See "How Banks Will Fare in a Commercial Real Estate Crash."

The problems now plaguing commercial real estate have no single cause, and the panel notes that the loans most likely to fail were made at the height of the real estate bubble when commercial real estate values had been driven above sustainable levels and loans.

"Many were made carelessly in a rush for profit," the panel said. ..........(more)

The complete piece is at: http://www.marketwatch.com/story/more-gloom-ahead-in-commercial-real-estate-2010-02-17?link=kiosk

[MannyGoldstein]

1. No Worries - Just Raise Taxes On The Middle Class

and give it to bankers.

Sincerely yours,

Larry, Timmy, Rahm & Barack

[stevedeshazer]

2. Recommended.

There's been a lot of talk about the default of home loans. This could be even worse.

[hunter]

3. Nobody wants to buy a big empty Circuit City for cheap???

Our small city's got two of 'em!

[marmar]

4. The blighting of suburbia is well underway......

..... not that those ugly big-box stores weren't eyesores when they were open.

[safeinOhio]

7. Flea markets and antique malls

[formercia]

9. Shelters for homeless people

starting with the employees.

[FarCenter]

5. The wafting risk of floating rate CMBS

http://ftalphaville.ft.com/blog/2010/02/17/152291/the-wafting-risk-of-floating-rate-cmbs/

Presenting interest rate risk for commercial real estate.

Sometime before the start of the new millennium real estate players hit upon a novel idea; commercial mortgage-backed securities (CMBS) collateralised by floating rate loans. The idea was that floating rate CMBS would give borrowers financial flexibility in the midst of interest rate uncertainty – in effect, allowing them to refinance their loans at a later (cheaper) date.

The floating CMBS proved popular. Almost twice as much of the floating type was issued than fixed rate CMBS in 2000, for instance, when the Federal Reserve was seeking to raise rates.

But floating rate CMBS hit something of a stumbling block in the midst of the financial crisis.

In fact, 2009 was a very bad year for the floating securities as the below table, from a just-published Standard & Poor’s report on the subject, should show:


Over the course of last year the rating agency took 4,038 ratings actions on fixed and floating rate US CMBS, including a record 3,984 downgrades. But on floating CMBS in particular, S&P lowered 476, affirmed 223, and raised none over the course of the year. Why the dismal floating rate performance?

<SNIP>

[sharesunited]

6. I keep hoping my SRS will reflect this distress. So far, nada.

http://finance.yahoo.com/q?s=Srs

[flyarm]

8. all kinds of auctions going on here in Fl of "new" condo's being sold off by banks..

for pennies to the dollar!

Literally the banks are auctioning condo's right out from under the contractors.

One such large contractor was just complaining about it in my paper...the previous buyers are also screaming..because it is devaluing their newly owned properties!