Revisiting The Looming Commercial Mortgage Disaster

The Provocateur ^ | 07/10/2009 | Mike Volpe

[fiscon1]

Congress Woman Carolyn Maloney held a hearing on the growing commercial real estate crisis. To understand what a threat the current state of the commercial real estate market is one only needs to read the testimoney of James Helsel of the National Association of Realtors.

Here are some of the pertinent numbers that will contextualize the problem. Starting in 2007, commercial real estate transactions dropped from $498 billion in 200, to $143 billion in 2008, to $15 billion year to date. At the same time, there were $230 billion in Commercial mortgage backed securities issued in 2007, $12 billion in 2008, and NONE so far this year. The market for securitized Commercial Mortgage Backed Securities is thus literally non existent.

[CharlesWayneCT]

I know there is a crisis here, but if there have been no real estate transactions this year (virtually none, only 15 billion vs over 100 billion last year), why would you expect there to be any significant new mortage securities? Last year with 100 billion in transactions, there was only 12 billion in securities, and the previous year the amount of securities was much less than the transactions as well.

[fiscon1]

I don’t disagree with your logic. Though, it also might be the chicken and egg. Is there no transactions because there is no longer a market for securitized mortgages?

Either way, figuring that out is beside the point. There is no one securitizing these mortgages. That means that commercial mortgages will be nearly impossible to do.