10A — October 12 - 25, 2012 — Mid Atlantic Real Estate Journal
www.marejournal.com
F INANCIAL D IGEST
By Bruce Coin, Bruce Coin Consulting, Inc. The current commercial mortgage market
A
s we head in to the last quarter of the year, there is abun-
Fannie and Freddie to keep li- quidity in those markets while keeping long term interest rates low • The Mortgage Bankers Association reported that “The apartment market remains healthy with increased mort- gage debt outstanding and increased absorption.” • Morningstar Credit Rat- ings reported that “One half of the $1.4 billion in performing commercial mortgage backed securities loans scheduled to mature in August paid off in full as scheduled”.
• Fitch Ratings indicated that “delinquencies in com- mercial real estate loan col- lateralized debt obligations declined for the fourth straight month.” •Also according to the Mort- gage Bankers Association, $2.37 trillion of commercial/ multifamily mortgage debt was outstanding at the end of this year’s second quarter which was $10.4 billion, or 0.4 percent lower than the balance of loans in CMBS, CDO and other Asset Backed Securities at the end of the first quarter
as issues continued to de- cline.” • Buyers of commercial mortgage-backed securities are accepting yields on new issues as narrow as 0.85 per- centage points above an (re- spective) interest rate bench- mark, the lowest (rate spread) since 2007. • In the multifamily sector, Marcus and Millichap Real Estate Investment Services stated: “Because the supply side of the equation is pretty much in check, we’re expect- ing the current favorable
dynamics in the apartment market to continue. In fact it is safe to declare that we have regained pre-recession levels of vacancies across the country and across the entire apartment sector.” • The U.S. Labor Depart- ment on September 27th , in a revision of its preliminary estimate of its “benchmark” closely watched payrolls data, stated that the U.S. economy likely created 386,000 more jobs in the 12 months through the end of March of this year than it previously estimated. 453,000 more total private sector jobs were created than initially projected including 145,000 more jobs in the trade, transportation and utilities category, plus 85,000 more in construction. It is very possible that the additional QE III market support could impact the com- mercial mortgage and real estate markets as well as the targeted housing market. By keeping long term bond and mortgage rates low, more in- vestors seeking higher yields may look to commercial real estate and mortgages. Prices of equities, high yield bonds and the more risky CMBS bonds gained about 12% in 2010 as a result of the “fed’s earlier QE II easing. QE III could have a similar but probably not as pronounced impact. Analysts at Fitch Ratings feel that the QE III could also have a positive impact on Real Estate Investment Trusts. Obviously, if QE III drives long termU.S. Treasury rates even lower, all borrowers, including REITs, will benefit and that benefit could attract more investors to REITs. As stated in an earlier col- umn, the last 3 months of any (non-recessionary year) are usually a great time to obtain mortgage financing and usu- ally a great time to buy or sell depending on which side of that equation your busi- ness lies. The foregoing sup- ports that these last 3 months should see abundant amount of activity as confidence is and has been returning to the commercial mortgage market. Hopefully, the outcome of Na- tional election on November 6th will further stimulate confidence. Bruce J. Coin is director of Bruce Coin Consulting, Inc. ■
dant “good news ” and support for optimism for participants of the com- mercial real estate and financing in- dusties:
Bruce Coin
• The Federal Reserve fi- nally announced its QE III (quantitative easing) plan to buy more mortgage bonds from
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