The commercial real estate bubble is even bigger than the Residental housing bubble, Commercial property owners won’t hesitate to give the property back like residential owners who will hang on til the very end…
I’m afraid you are right and this is so very true.
The commercial real estate bubble is even bigger than the Residental housing bubble, Commercial property owners won’t hesitate to give the property back like residential owners who will hang on til the very end…
I’m afraid you are right and this is so very true.
That is the next shoe to drop. We won’t feel it until first half of next year. And keep in mind the bulk of home resets won’t take place until 2011.
I will attend a commercial conf. in San Diego in Sept. which will be attended by most large commercial developers. It will be interesting to hear what they have to say.
The commercial real estate bubble is even bigger than the Residental housing bubble, Commercial property owners won’t hesitate to give the property back like residential owners who will hang on til the very end…
I’m afraid you are right and this is so very true.
That is the next shoe to drop. We won’t feel it until first half of next year ...
Why next year? Media and many AFBers have been predicting this last shoe since last year. If true, those guys’ forecast is more than a year early. Can you guys tell us when it is about a month or so not so early. Price of such stocks could have doubled or tripled before collapsing ... missed profits.
Why next year? Media and many AFBers have been predicting this last shoe since last year. If true, those guys’ forecast is more than a year early. Can you guys tell us when it is about a month or so not so early. Price of such stocks could have doubled or tripled before collapsing ... missed profits.
I don’t think *anyone* has a crystal ball that can truly predict anything about this market. If there was such a crystal ball, it’s owner would be rich beyond imagination.
Back on May 23rd I posted Realtytrac’s total foreclosures as 1,913,073.
On June 21st, the current number of foreclosures was 1,947,878.
That is a rise of 34,000 in a month. And like I said, they said their numbers were NOT cumulative. They were current numbers.
The current number June 25th was 1,962,567.
The current number June 27th at realtytrac was 1,970,744
The current number June 29th was 1,976,933
The current number July 1st was 1,968,864
The current number July 2nd was 1,979,063
The current number July 4th was 1,986,423
The current number July 5th was 1,979,835
The current number July 6th was 1,962,353
The current number July 7th was 1,951,656
The current number July 7th afternoon was 1,960,408
The current number July 9th was 1,963,443
The current number July 10th was 1,954,505
The current number July 10th afternoon was 1,929,297
The current number July 12th was 1,934,506
The current number July 13th was 1,931,898
The current number July 14th was 1,925,419
The current number July 15th was 1,925,610
The current number July 16th was 1,927,152
The current number July 17th was 1,952,171
The current number July 17th afternoon was 1,962,449
The current number July 19th was 1,964,792
The current number July 20th was 1,963,794
The current number July 21st was 1,958,248
The current number July 22nd was 1,963,101
The current number July 23rd was 1,963,128
Option ARMs blowing up… 50%-100% on the CRE crisis… Starwood bids on Corus assets… Goldman: Smart or crooked?... Jeff Clark lining up a Goldman Sachs short recommendation…
Subprime mortgages are no longer our biggest problem. For the third straight month, option adjustable-rate mortgages (option ARMs) are going delinquent faster than subprime mortgages.
Option ARMs usually provide three options for payment. You can make the regular payment of principal and interest. You can make the interest only. Or you can make a minimum payment that doesn’t even cover the interest. The partial interest payment adds the unpaid interest to the principal. That’s what more than 80% of option-ARM borrowers choose. With housing prices still in freefall, option-ARM borrowers’ debts are growing while the value of their underlying property continues to plummet… an obvious recipe for default.
As of April, 36.9% of ARMs were at least 60 days past due while 19% were in foreclosure. About 34% of subprime mortgages are delinquent and 14.5% are in foreclosure.
While option ARMs make up a smaller part of the mortgage market than subprimes, several banks’ balance sheets hold high concentrations of them. Wells Fargo got stuck with $115 billion of the loans when it bought Wachovia. JPMorgan holds $40.2 billion of them… “The realization of the issues related to option ARMs is just the beginning,” said Chris Marinac, director of research at FIG Partners.
But the big banks won’t experience anywhere near the pain the smaller, regional banks will feel regarding commercial real estate… The Fed estimates the commercial property market at $6.5 trillion – one-third the size of the housing market. And commercial property loans outstanding sit at around $3.3 trillion, half of which are held by banks. Despite being much smaller than the housing market, these commercial loans will still wreak havoc on the regional banks…
In 1993, less than 2% of U.S. banks had exposure to commercial real estate that totaled more than five times their Tier 1 capital. By late 2008, that number jumped to 12% and included some 800 banks and thrifts. California-based property consultants, Foresight Analytics, estimates the U.S. banking sector could experience $250 billion in commercial real estate loan losses, which could cause another 700 banks to fail.
In the current issue of Extreme Value, I found a regional bank with 64% of its loans in risky commercial mortgages, so-called C&I loans (business loans) and commercial construction loans. As I told my readers, it made the wrong loans at the wrong time in all the wrong places. If the situation plays out as I expect, you could make anywhere from 50% to 100% before the year is out. To get access to the full report, click here.
If this deal goes through, we’ll have a clearer picture of commercial real estate values and just how much regional banks will suffer… Private-equity firm Starwood Property Group announced yesterday it’s “bidding on a bank.” Without naming the bank, CEO Barry Sternlicht said the bank in question is heavily concentrated in real-estate lending and has more than 110 construction loans.
Insiders identified the bank as the poster boy of excessive condominium lending, Corus Bankshares. We’ve been telling you about Corus’ greed and mismanagement for more than a year… Corus is most highly concentrated in Florida and California, but has condo loans on the brink of default all over the country.
More bad news from the commercial real estate sector… Malls are looking like ghost towns, and rents are dropping as a result. Rents are falling because mall leases have “co-tenancy” agreements. That’s where the mall agrees to give you a break on the rent if certain big stores leave the mall or if a certain number of stores are empty. Tenants can have their rent cut as much as 50% while the mall looks for new tenants to fill the void. Chico’s and Charming Shoppes (which owns Fashion Bug and Lane Bryant) have both saved millions on rent so far this year.
Falling rents can’t be good for the owners of malls and other retail centers. Nor can they be good for the banks, insurance companies, and investors who have lent them money.
Goldman Sachs announced a 65% jump in second-quarter earnings to $3.44 billion ($4.93 a share) – up from $2.09 billion a year ago. The numbers include a $426 million dividend related to paying back its TARP loan. Analysts expected earnings of $3.48 a share.
Investment-banking revenue was down 15%. Once again, Goldman’s magical, mystical trading department produced the best results. They must be the smartest people in the whole, wide world… or maybe they’re just the most well-connected. Whatever the cause, Goldman winds up on the winning side of everything, impossible as that is. And as far as I know, no one is investigating how this profit-in-every-possible-scenario machine really works.
I’m no expert on Goldman Sachs, and there’s a great deal about investment banking I’ll never know, but no one throughout history has been smart enough to be right all the time… though many have been crooked enough.
The rewards for being smart (crooked?) enough to be right every time are enormous. Goldman set aside $6.65 billion (half of revenue) in the second quarter to compensate its employees, all of whom are above average, like the children of Lake Woebegone. Total compensation for the first half of the year was $11.36 billion – up 33% from the same period in 2008. As the rest of the world melts down, Goldman’s compensation hits new heights.
Despite a blockbuster quarter at Goldman, Jeff Clark thinks the bank is setting up for a massive fall. But he’s not going short yet… He’s waiting for shares to hit a certain point and trip a specific “sell” indicator. He’s keeping Short Report readers abreast in his Direct Line.
Why next year? Media and many AFBers have been predicting this last shoe since last year. If true, those guys’ forecast is more than a year early. Can you guys tell us when it is about a month or so not so early. Price of such stocks could have doubled or tripled before collapsing ... missed profits.
I have made exactly THREE real estate calls, on this board to date { remember, 30+ years in residential/management/building and commercial real estate ]
One: Residental bottomed out { really, not the AVERAGE SALE PRICE, but the SELL IT AT ANY PRICE OFFER YOU CAN GET } in Jan.
Two: Retail, bombing. This is reaching critical mass RIGHT NOW.
Three: Office and warehouse, will hit late this year.
So, in conclusion.
Buy residential real estate, you are now past the absolute bargain phase. Buy the VERY BEST LOCATIONS only, they will recover the most and over the long haul be the best for you.
Sell short hard, malls.
Set up shorts for Office park developers and warehouse complexes.
BUY with both hands, NLY { Annaly} and other repackagers of Fed Backed loans, they are right now yielding a MASSIVE almost “risk free” 15.5% annualized.
Where you gonna get that rate, with the same risk as a T-bill? { OK, I know the Fed is kaput X 200 over ... but they can print as much paper as they need to give you the promised worthless paper, but they have the only game that is legal right now in that area. }
Government must find a way to save homes
OUR OPINION: Government needs new plan to cope with foreclosure crisis
The Great Recession, as the economic crisis has been dubbed, started with a housing bust. Today, the housing failure is still driving the economy down, with the unstoppable foreclosure machine gobbling up properties at an astonishing rate.
The Obama administration’s program to slow down foreclosures has had limited success, to put it mildly. The Treasury Department said recently that only 270,000 homeowners had been offered loan modifications under the Making Home Affordable program. But only 131,030 loans had actually been modified as of early July, however.
Either way, it’s a drop in the Florida Bay compared to reports that some 3.5 million homeowners face foreclosure this year—a rate close to 10,000 per day—because mortgage holders can’t pay, are ‘‘under water’’ (stuck with a mortgage greater than the value of the property) or staring at an unaffordable upcoming increase in an adjustable rate mortgage. By one reliable estimate, some 15 million homes were ‘‘under water’’ as of March.
Periodically, news stories suggest that the situation is improving nationwide. Don’t bet on it. The most likely reasons for a slowdown are state laws that extend the foreclosure process and, here and there, a state-imposed moratorium. These local rules will eventually expire, however, leaving imperiled homeowners stranded and increasing the rate of foreclosure activity.
I THINK IT HAS TO GET BETTER in Florida, California, Arizona and Nevada before it gets better for the rest of us.
Guess that depends on which “America” you live in.
From Florida….foreclosures going up…nothing selling…For Rent signs everywhere…too many places to live, not enough people to live in them..people losing jobs, can’t find another…banktuptcy attorneys backed up, busier than they have ever been…
Government must find a way to save homes
OUR OPINION: Government needs new plan to cope with foreclosure crisis
The Great Recession, as the economic crisis has been dubbed, started with a housing bust. Today, the housing failure is still driving the economy down, with the unstoppable foreclosure machine gobbling up properties at an astonishing rate.
The Obama administration’s program to slow down foreclosures has had limited success, to put it mildly. The Treasury Department said recently that only 270,000 homeowners had been offered loan modifications under the Making Home Affordable program. But only 131,030 loans had actually been modified as of early July, however.
Either way, it’s a drop in the Florida Bay compared to reports that some 3.5 million homeowners face foreclosure this year—a rate close to 10,000 per day—because mortgage holders can’t pay, are ‘‘under water’’ (stuck with a mortgage greater than the value of the property) or staring at an unaffordable upcoming increase in an adjustable rate mortgage. By one reliable estimate, some 15 million homes were ‘‘under water’’ as of March.
Periodically, news stories suggest that the situation is improving nationwide. Don’t bet on it. The most likely reasons for a slowdown are state laws that extend the foreclosure process and, here and there, a state-imposed moratorium. These local rules will eventually expire, however, leaving imperiled homeowners stranded and increasing the rate of foreclosure activity.
Government must find a way to save homes
OUR OPINION: Government needs new plan to cope with foreclosure crisis
The Great Recession, as the economic crisis has been dubbed, started with a housing bust. Today, the housing failure is still driving the economy down, with the unstoppable foreclosure machine gobbling up properties at an astonishing rate.
The Obama administration’s program to slow down foreclosures has had limited success, to put it mildly. The Treasury Department said recently that only 270,000 homeowners had been offered loan modifications under the Making Home Affordable program. But only 131,030 loans had actually been modified as of early July, however.
Either way, it’s a drop in the Florida Bay compared to reports that some 3.5 million homeowners face foreclosure this year—a rate close to 10,000 per day—because mortgage holders can’t pay, are ‘‘under water’’ (stuck with a mortgage greater than the value of the property) or staring at an unaffordable upcoming increase in an adjustable rate mortgage. By one reliable estimate, some 15 million homes were ‘‘under water’’ as of March.
Periodically, news stories suggest that the situation is improving nationwide. Don’t bet on it. The most likely reasons for a slowdown are state laws that extend the foreclosure process and, here and there, a state-imposed moratorium. These local rules will eventually expire, however, leaving imperiled homeowners stranded and increasing the rate of foreclosure activity.
I THINK IT HAS TO GET BETTER in Florida, California, Arizona and Nevada before it gets better for the rest of us.
Read the Fed minutes, artman. We live in an area where things are better: four seasons, lakes, fishing, open trails, and rising property values.
Eric-
Despite all of our Skyping and the Money as Debt videos you still don’t seem to understand!
Houses are NOT rising in value - dollars are depreciating in value (I mean always - not relative to other currencies)! If houses appreciated, you’d be able to sell your house and buy two just like it across the street! Or you’d come home from work and find that your house GREW!
Government must find a way to save homes
OUR OPINION: Government needs new plan to cope with foreclosure crisis
The Great Recession, as the economic crisis has been dubbed, started with a housing bust. Today, the housing failure is still driving the economy down, with the unstoppable foreclosure machine gobbling up properties at an astonishing rate.
The Obama administration’s program to slow down foreclosures has had limited success, to put it mildly. The Treasury Department said recently that only 270,000 homeowners had been offered loan modifications under the Making Home Affordable program. But only 131,030 loans had actually been modified as of early July, however.
Either way, it’s a drop in the Florida Bay compared to reports that some 3.5 million homeowners face foreclosure this year—a rate close to 10,000 per day—because mortgage holders can’t pay, are ‘‘under water’’ (stuck with a mortgage greater than the value of the property) or staring at an unaffordable upcoming increase in an adjustable rate mortgage. By one reliable estimate, some 15 million homes were ‘‘under water’’ as of March.
Periodically, news stories suggest that the situation is improving nationwide. Don’t bet on it. The most likely reasons for a slowdown are state laws that extend the foreclosure process and, here and there, a state-imposed moratorium. These local rules will eventually expire, however, leaving imperiled homeowners stranded and increasing the rate of foreclosure activity.
I THINK IT HAS TO GET BETTER in Florida, California, Arizona and Nevada before it gets better for the rest of us.
Read the Fed minutes, artman. We live in an area where things are better: four seasons, lakes, fishing, open trails, and rising property values.
Eric-
Despite all of our Skyping and the Money as Debt videos you still don’t seem to understand!
Houses are NOT rising in value - dollars are depreciating in value (I mean always - not relative to other currencies)! If houses appreciated, you’d be able to sell your house and buy two just like it across the street! Or you’d come home from work and find that your house GREW!
My house does grow, Mike. It’s construction season. At any-rate, Mike, I do get it. However, unlike nearly everywhere else, in Minnesota our property values are increasing relative to everybody else because we never overvalued our property.
I THINK IT HAS TO GET BETTER in Florida, California, Arizona and Nevada before it gets better for the rest of us.
Guess that depends on which “America” you live in.
From Florida….foreclosures going up…nothing selling…For Rent signs everywhere…too many places to live, not enough people to live in them..people losing jobs, can’t find another…banktuptcy attorneys backed up, busier than they have ever been…
Not exactly the “sunshine” state, these days
What I MEANT was, the foreclosure problem will be solved in areas where the problem is the worst first. There are lots of foreclosures in Minnesota. But not as many as some other states.
The post was from the Miami Herald. I was trying to point out, I don’t think we have hit bottom yet. even though some pundits on CNBC say we have hit bottom.
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