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Wednesday, July 21, 2010

Commercial Mortgages Thawing?

Was the demise of commercial real estate greatly exaggerated?

Analysts have been warning for months that commercial real estate could be the next shoe to drop in the subprime mortgage collapse that came to a head in 2008.

But with signs of thawing in the securitization markets and indications that investors are ready to come to auction when properties are on the block, the idea that the industry represents a major looming danger for the economy is losing traction.

Prudential Financial executives, speaking at a market outlook discussion Tuesday in New York, said they are "reluctant optimists" on the space. Marc Halle, the firm's managing director of real estate investments, compared the industry to a "fly wheel" that likely will accelerate in the years ahead.

Some, like me, predicted gloom in commercial mortgages last year. It should be noted that the worst of the balloon loans will expire in 2012 and so there's still a long way to go.


AG said...

Can't balloon loans just get refinanced at today's obscenely low rates?

mike volpe said...

Excellent question. If you qualify to refinance then yes. The problem is that these commercial properties are under water like in residential. So, if you don't qualify for a new loan or you'd need to put down hundreds of thousands of dollars to get a new loan then the low rate won't help you.