Second housing bust on the way

[Tempest]

 Quote:

The number of new loans for commercial properties plunged by 70 percent in the first quarter compared to a year earlier, the Mortgage Bankers Association said Tuesday. And nationwide mortgage originations for the quarter were down 26 percent from the end of 2008.

http://www.dallasnews.com/sharedcontent/dws/bus/stories/051409dnbuscommercialloans.2001146e.html

 Quote:

Based on transaction prices, values of top-grade commercial properties across the country have fallen about 26 percent since mid-2007, the MIT researchers estimate.

http://www.dallasnews.com/sharedcontent/...n1.3cbef00.html

 

[Primus]

When others expect the second wave of defaults on the way these fairy-tale tellers from the Fed want we still trust their stress test results ! The Mortgage Metdown

 

[Win]

Well, the number of commercial mortgage originations probably needs to drop about 100% in some places, and stay that way for awhile, and I would include Dallas in that. So the Dallas Morning News may be a little more angsty about things like that, than many places might be. I like Dallas, and it's the only place I would be interested in living besides where I am at, but it has always seemed perpetually overbuilt commercially to me, all the way back to the 1980's when I first became aware of such things. They just seem to like to build things, regardless of whether they are needed or not, in a sort of perpetual economic optimism, or maybe just needing to suck money out of a new project to pay for the last one. Periodically, Dallas developers would show up around here blowing hot air. We even had a name for them: "Dallas Flakes". The last BIG commercial project in my hometown was led by a group from Dallas. It's about 50% empty and will be that way for years. These are simple supply and demand issues, same as with residential housing. All the fooling around with bailouts will just make things worse and prolong the ultimate resetting of prices, which is what has to happen to go forward again. Where I bought my second home, it is definitely overbuilt commercially, and I have no doubt values are off at least 25% from their peak. When they are off 35-40%, where they need to be, I'll be a buyer. It wouldn't surprise me in the least if a significant percentage of the overbuilding in NWA was led by Dallas Flakes.

 

[oilyriser]

I visited a US town last summer and saw about 8% commercial buildings with for rent signs up, and on the outskirts of town, saw rows of new commercial buildings going up right beside the half occupied ones.

 

[smokey1]

with the wave of dealer closings which will have an impact on local businesses ( private or other ) it will hit all in the wallet and lead to more foreclosures , late or non payment of credit cards , car loan defaults , etc. . Sad . An acquaintance serves for banks and other financial institutions and is making over $150,000 a year . Gets to write off mileage as well . Don't know how he can live with it . The knowing that health , death , job loss , and other misfortune that lead to his fortune . Must be the money he earns overrides his emotions .

 

[Gary Allan]

 Originally Posted By: oilyriser

I visited a US town last summer and saw about 8% commercial buildings with for rent signs up, and on the outskirts of town, saw rows of new commercial buildings going up right beside the half occupied ones.

It's how it works, oily. When your neighboring township has a 1500 unit subdivision going up, there's always a fixed amount of neo-retail "packaged" to go with it. So, the former tax paying economic well that was in an older part of the area ...moves ...goes idle..that tax base erodes. Continue on to the next expanding township ... Right now the physics of the model are showing their stress points. It's kinda like looking at an ant colony that got into some Pb laden sugar stocks.

 

[PandaBear]

Yup, sales tax arm race. You got to top the county next door in new development or else you loss your population, and therefore taxes, to your neighbor.

 

[smokey1]

tax revenue for schools , local government , transportation department , etc. is big issue with all the empty homes and businesses . More burden on the existing owners . Which could put them over the edge . Thus a nasty cycle .

 

[oilyriser]

I suspect it was mostly speculation fueled by the private credit bubble and now reinstated under government force with public money. Crash v. 2.0 is on the horizon.

 

[PandaBear]

Until the FED restate the mark to market policy on asset value, the bank will just take the lost and hold on to the properties until the market recover. There is no way they can afford to write down all the properties value without taking and major hit, and there is no way they can shore up enough capital before that. Hence the empty houses all over the place, yet people still aren't buying.