ntb

Big CMBS Loans Near Default; CMBX Soars, REITs Tank

I live nearby the Promenade Shops, have substantial commerical loan underwriting and commerical brokerage experience and in my opinion any fool who put a loan on this property deserves what they get. It has at most a 180 degree trade area, the shops do not match the demographic and has a poor layout. What good is a starting 1.2 DCR if in 5 years or less most of the stores are going to fail. The problem with commerical loans are that they have 10 year terms. Even if these loans do not default it is going to take a miracle to get them refinanced in 10 years at the crazy valuations they were originally underwritten with. I would guess the Promenade's value today is probably 40% lower than the underwritten value.

How Does the WaMu Failure Compare?

WAMU's demise came about by a run on the bank - yes. This run was caused by the government. I have a source at a major WAMU depositor (major real estate owner with all rental income running through WAMU) that was told by the FED to transfer all of their accounts to another bank. The deal to close WAMU was completed a few weeks ago and this "run" was not market based and is being used for politcal purposes.

Behind closed door meetings, secret deals, insider information being given to selected parties - government gone extemely bad.

Housing Bubble and Real Estate Market Tracker

Housing values are based on supply and demand. The sticks and bricks cost are roughly constant with land value being the moving factor. Residential land value is set primarily by homebuilders. No homebuilder is buying land at this time and will not until things stabilize. Land values will continue to drop until homes can be delivered at an affordable price. Unfortunately the loose loan underwriting that was supposed to create greater homeownership caused land values to reach unstainable levels and now the entire country's residential land/housing is being repriced. The end result is that probably more people will loose their houses than were helped. The hangover and lingering effects on the economy will last several years.