Samantha Clark

Clark’s e-news

Samantha Clark, Associate Broker

Real Estate Services

Season’s Greetings

Contact Samantha Clark at samantha.clark@coldwellbankerlegacy.com

or 505.401.1561

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Questions or comments? E-mail us at samantha.clark@coldwellbankerlegacy.com
or call 505-293-3700 (office).

Clark's e-news: Sustainable Housing + ABQ Development

2009-12-18T12:56:00.000-07:00

Clark’s e-news

Samantha Clark, Associate Broker

Real Estate Services

Sustainable Housing + ABQ Development

Back in 2001, Scientific American wrote the following about what would happen if a hurricane ever hit the Big Easy—New Orleans is a disaster waiting to happen. The city lies below sea level, in a bowl bordered by levees that fend off Lake Pontchartrain to the north and the Mississippi River to the south and west. And because of a damning confluence of factors, the city is sinking further, putting it at increasing flood risk after even minor storms. The low-lying Mississippi Delta, which buffers the city from the gulf, is also rapidly disappearing. A year from now another 25 to 30 square miles of delta marsh--an area the size of Manhattan--will have vanished. An acre disappears every 24 minutes.

Each loss gives a storm surge a clearer path to wash over the delta and pour into the bowl, trapping one million people inside and another million in surrounding communities. Extensive evacuation would be impossible because the surging water would cut off the few escape routes. Scientists at Louisiana State University (L.S.U.), who have modeled hundreds of possible storm tracks on advanced computers, predict that more than 100,000 people could die.

An iReporter at CNN has posted a fascinating look at rebuilding in New Orleans after the inevitable damage of Hurricane Katrina. Putting up new housing isn’t just about constructing new houses on stilts. It’s about creating green, affordable and safe homes on a large scale.

Neighborhoods like the Lower Ninth Ward aren’t just looking at individual houses, but also how the neighborhood interacts with, and needs to rebuild, the coast. They are figuring out how they can fit sustainably in the environment. This is a model of how all housing should be approached in the 21st century.

From the ruins of the housing mortgage meltdown, to economic contraction, to growing issues of pollution, commuter miles and water scarcity, the current crisis in the housing industry will also help open force us to find better ways of creating communities.

So while 2009 has been a rough year in real estate, I’m confident 2010 will bring out the best minds to find creative and sustainable solutions in housing. The opportunity now exists to find excellent new ways of doing business. While many developers, builders, and real estate companies are frozen waiting for the last century to come back, a few companies are adapting and moving forward in our current environment. Some are even starting to thrive.

ABQ Development Round Up 2009

Remarks NM Business Weekly, in real estate, 2009 was all about survival. Most survived, but no developer or CEO had a breakthrough year.

With deal flow nearly non-existent and construction starts thudding almost to a halt, it was tough to make a buck in all forms of commercial real estate. However, several entrepreneurs had a notable year, including Gary Goodman, Vincent Garcia and Gordon “Skip” Skarsgard.

· Garcia’s Blue Dot Corp. has been unable to complete the 10-story Anasazi condo complex at 6th and Central Avenue because of lender issues, some of which were partially due to the recessionary times. Garcia’s foreclosure problems at Copper Square, at 5th and Copper, and the Anasazi project in downtown Albuquerque offered stark visual evidence of the stress the recession has put on Downtown development.

· Gary Goodman was the Business Weekly’s 2008 top newsmaker, but he had a bipolar 2009. While he opened his Andaluz hotel Downtown, his Winrock Town Center project in Uptown was unable to break ground.

· Despite the recession, Gordon “Skip” Skarsgard pulled a trifecta in 2009. He was able to fully lease his new Class A Paseo Nuevo building in the Duke City while making big strides with his Las Soleras project in Santa Fe and jumpstarting a new project in Rio Rancho.

· In commercial real estate brokerage, two large national names – Grubb & Ellis New Mexico and CB Richard Ellis – have been the dominant players in Albuquerque. Steve Maestas made major strides to change that in 2009.

Maestas, a former CB Richard Ellis retail broker who was mentored by Gary Goodman when he leased his shopping centers, has built his own firm, Maestas & Ward Commerical Real Estate, into a major competitor for those national powerhouses. He has built his boutique agency into a top five brokerage and took market share in 2009 by being aggressive while his competitors hunkered down.

Young (age 46) and ambitious, Maestas reasons that recessions are the best times for wealth transfer, and he aims to get his share while others retrench. By raiding his larger competitors for talent, he was able to expand his services and made headway, especially in property management.

Contact Samantha Clark at samantha.clark@coldwellbankerlegacy.com

or 505.401.1561

To remove your name from our mailing list, please click here.

Questions or comments? E-mail us at samantha.clark@coldwellbankerlegacy.com
or call 505-293-3700 (office).

Clark's e-news: Trains + Recovery

2009-12-11T08:25:00.000-07:00

Clark’s e-news

Samantha Clark, Associate Broker

Real Estate Services

Trains + Recovery

Recently I took an Amtrak train to California and was reminded of how different and fun train travel can be. I rode trains often when I was a student on the east coast, now many years ago. I enjoy the slower pace, far less hassle than airports, and meeting people in casual conversations. While the Southwest doesn’t have as many opportunities to travel by train, there are still a few gems out there.

· Amtrak: The Southwest Chief runs from Chicago, through Albuquerque, to Los Angeles. Cheaper than flying, there are lots of connections to trains running along cities on the west coast. Family and sleeping cabins are available, but plan to spend a few hundred extra for the privilege.

· The Rail Runner, which travels from Santa Fe south to Albuquerque, Los Lunas and Belen, was just featured in Mass Transit Magazine as the fastest commuter rail line to be up and running in the last 25 years. The train now runs seven days a week and bus connections in Albuquerque and Santa Fe are free.

· Enjoy classic train cars from the 1920s on the Santa Fe Southern Railway through scenic high desert. December features caroling and visits with Santa.

· The Cumbres & Toltec Scenic Railroad was originally constructed in 1880 as part of the Rio Grande’s San Juan Extension, which served the silver mining district of the San Juan mountains in southwestern Colorado. Like all of the Rio Grande at the time, it was built to a gauge of 3 feet between the rails, instead of the more common 4 feet, 8-1/2 inches that became standard in the United States.

With the repeal of the Sherman Act in 1893 and its devastating effect on the silver mining industry, traffic over the San Juan Extension failed to warrant conversion to standard gauge. Over the ensuing decades it became an isolated anachronism, receiving its last major upgrades in equipment and infrastructure in the 1920s. Finally, in 1969 the Interstate Commerce Commission granted the Rio Grande’s request to abandon its remaining narrow gauge main line trackage, thereby ending the last use of steam locomotives in general freight service in the United States.

Most of the abandoned track was dismantled soon after the ICC’s decision, but the most scenic portion of the line was saved.

· For a short ride, the ABQ BioPark operates two narrow-gauge train rides. The Rio Line travels between the Aquarium & Botanic Garden, Tingley Beach and the Zoo. The Thunderbird Express loops through the Zoo.

· While technically not a train, Sandia Peak Tram is the world’s longest aerial tramway at 2.7 miles, running to the peak of Sandia Mountain. Enjoy awesome views and fabulous at sunset. Skiing and snowboarding is expected to open December 19.

Fastest Recovering Cities

Forbes just ranked the fastest recovering cities in the USA. The Albuquerque metro area was 24th on the list.

Remarked Forbes—to form the list, we ranked the 100 largest Metropolitan Statistical Areas--geographic entities that the U.S. Office of Management and Budget defines and uses in collecting statistics--in five categories: unemployment rate, GMP (a measure of the size of a city's economy), foreclosures, home prices and sales rates.

While there is no foolproof method for resisting recession, a common thread in thriving cities is an economy fed by multiple industries. Cities where home prices that don't fluctuate wildly are particularly well-positioned to ride out this recession, because they were spared the domino effect of foreclosures, lost jobs and lost productivity.

There's a lesson to be learned from these cities, some of which aren't economically thriving, but all of which are well-equipped to emerge from the recession in a similar position to where they started. Rather than chasing rising home prices or apparently plentiful jobs in one-industry towns, families looking for long-term economic stability should seek spots where industry is diverse and housing price shifts are benign.

Commercial Financing Improving

Reports CoStar, the commercial mortgage bond securitization window that has been closed for nearly two years during this recession has reopened for business in the last few weeks and investors have lined up encouragingly to take advantage of a new round of CMBS offerings.

Several investment banks have announced that they are firing up their conduit lending programs and will begin to originate and warehouse loans for multi-borrower securitizations, said Chris Moyer, an associate with Cushman & Wakefield Sonnenblick-Goldman in New York.

"In the near term, we expect to see single-borrower transactions as the first ones to be securitized," S&P wrote in a recent report. "The underlying loans will likely be to REITs and institutional owners/operators with unencumbered assets or assets with low leverage. Other potential issuers include finance and insurance companies with real estate holdings and seasoned loan pools on their balance sheets, or the ability to leverage their balance sheets to originate new loans."

"We expect the loans to be smaller than in the recent single-borrower transactions, with lower all-in leverage, little or no additional debt held outside the trust, five-year loan terms with 25- or 30-year amortization schedules, and terms and conditions that are more lender-friendly. The properties are likely to be underwritten more conservatively, with higher vacancy assumptions and in-place rents (without the projected upside that may have been factored into recent-vintage loans). In fact, it is possible that property values will reflect a downward trend or an expectation that rents and occupancies may fall further," S&P wrote.

Contact Samantha Clark at samantha.clark@coldwellbankerlegacy.com

or 505.401.1561

To remove your name from our mailing list, please click here.

Questions or comments? E-mail us at samantha.clark@coldwellbankerlegacy.com
or call 505-293-3700 (office).

Clark's e-news: End of PreFab?

2009-12-04T11:43:00.000-07:00

Clark’s e-news

Samantha Clark, Associate Broker

Real Estate Services

End of PreFab?

Make It Right

Reports the NY Times, in 2007, frustrated by the slow pace of rebuilding in the Lower Ninth, Brad Pitt set up a foundation called Make It Right; the foundation then commissioned 13 architecture firms to design affordable, green houses. The organization plans to build 150 homes, all for returning Lower Ninth residents. So far, just 15 of them are occupied, but those 15 make a big impression.

Indeed, from the main route into the Lower Ninth, the Claiborne Avenue Bridge, it’s impossible to miss the Brad Pitt Houses, as everyone here calls them. They are sprawling, angular buildings in bold hues not usually seen outside a gelateria. Monuments to the city’s resilience, and to Hollywood’s big heart, they are also New Orleans’s newest tourist attraction.

Tour buses, including those of Cajun Encounters (504-834-1770; www.cajunencounters.com) and Gray Line (504-587-0709; www.graylineneworleans.com), pass by the houses but don’t stop to let passengers walk around.

End of PreFab?

Contact Samantha Clark at samantha.clark@coldwellbankerlegacy.com

or 505.401.1561

To remove your name from our mailing list, please click here.

Questions or comments? E-mail us at samantha.clark@coldwellbankerlegacy.com
or call 505-293-3700 (office).

Clark's e-news: Happy Thanksgiving

2009-11-23T13:28:00.000-07:00

Clark’s e-news

Samantha Clark, Associate Broker

Real Estate Services

Happy Thanksgiving

Contact Samantha Clark at samantha.clark@coldwellbankerlegacy.com

or 505.401.1561

To remove your name from our mailing list, please click here.

Questions or comments? E-mail us at samantha.clark@coldwellbankerlegacy.com
or call 505-293-3700 (office).

Clark's e-news: Trends

2009-11-13T11:42:00.000-07:00

Clark’s e-news

Samantha Clark, Associate Broker

Real Estate Services

Trends

Looking for something different to do? New Mexico State Parks offer “Park Stories” around the state in designated “Heritage Parks.”

Other events at New Mexico state parks in November include night sky viewing, kids fishing clinic, an ancient beach hike and birding. Most events are free or low cost.

Luxury Homebuilding Returning?

Reports Portfolio.com, in a sign that the luxury homebuilding market, at least, is on its way back, Toll Brothers Inc. received a rush of new business in its latest quarter.

Horsham, Pennsylvania-based Toll Brothers said in a preliminary announcement of its fiscal 2009 fourth-quarter results that net signed contracts jumped 42 percent to approximately 765 units compared to fiscal 2008’s fourth quarter. Toll Brothers said the dollar value of contracts was 62 percent higher in the quarter ended October 31, than the prior year's quarter, and that the latest quarter’s totals exceeded fiscal year 2007's fourth-quarter results.

Of course, comparing results to last year is comparing them to the deepest portion of the financial crisis, when the entire economy seemed to seize. But the improvement over 2007 is a heartening sign.

“The surprise was more on the upside,” David Goldberg, an analyst with UBS Securities LLC in New York told Bloomberg. “They did better than we thought.”

"We have definitely progressed from one year ago,” said Toll Brothers CEO Robert Toll. “The shock to the financial system in mid-September 2008 that shut down the capital markets appears to be mostly behind us. The improvement in consumer confidence over the past year, the increasing stabilization of home prices, the decline in unsold home inventories, and the reduction in buyer cancellation rates suggest that the new-home market should be improving; we sense that it is, though slowly and through choppy waters."

Across the broader U.S. housing market, the picture remains grim, though somewhat less grim than in previous months, according to a Zillow.com report released earlier this month.

Home values declined for the 11th straight quarter, the Internet real estate company said. Values fell 6.9 percent to $190,400.

But the extension of the home tax credit recently could bolster sales in the next few months, said Zillow chief economist Stan Humphries.

"The next several months will be critical to the housing market. Previously, we'd been expecting to see increasing foreclosure rates during the real estate market's slow winter season, a confluence of events that would likely drive inventory up and prices down. But now, with the extension of the $8,000 first-time homebuyer tax credit and a new $6,500 credit for some repeat homebuyers, we could see a bump in demand that could partially offset the increased supply of foreclosed homes on the market," he said.

Commercial

Asks the NY Times—Is the pending commercial real estate crisis everyone seems to be afraid of nothing but a myth? Sam Zell thinks so.

Mr. Zell, the billionaire real estate investor who has been maligned for his bad bet on the Tribune Company, told a roomful of investors this week that fear of defaults in the commercial real estate market has been “greatly exaggerated,” according Crain’s Chicago Business.

“Everyone is waiting for the grave dancer to come and exercise his magic potion,” Mr. Zell said at the Invest For Kids charity event in downtown Chicago, according to Crain’s. “But you need two to tango.”

Owners of commercial and residential buildings have no incentive to sell and will likely be able to fill their vacancies by 2011 or 2012, albeit at rates 30 percent below their peaks, he said.

While less optimistic, the CoStar Group remarks that if landlords across the country can make it through the coming layoff season, (November - January), they may begin to see some stabilization in demand from commercial tenants for space. Looking out 12 to 24 months, business owners say they expect their companies to emerge from the recession well positioned for growth over the next two years, according to a crop of employment outlook reports issued this week

Comments Daily Finance, what's most striking about the commercial real estate market is how quiet it is.

"It's like a storm is brewing and it has everyone standing on the sidelines," says Bob Spratt, president of commercial real estate firm Hill Partners Inc.

And that near silence is expected to continue until 2010, when the market will likely reach its bottom, with values declining 40% to 50% off 2007 market peaks, according to the Emerging Trends in Real Estate 2010 Report recently released by PricewaterhouseCoopers LLP and the Urban Land Institute.

Contact Samantha Clark at samantha.clark@coldwellbankerlegacy.com

or 505.401.1561

To remove your name from our mailing list, please click here.

Questions or comments? E-mail us at samantha.clark@coldwellbankerlegacy.com
or call 505-293-3700 (office).

Clark's e-news: ABQ Housing + Senior Housing

2009-10-30T08:25:00.000-06:00

Clark’s e-news

Samantha Clark, Associate Broker

Real Estate Services

ABQ Housing + Senior Housing

Reports the NM Business Weekly, the country has come through the worst of the recession. However, the pain is not over yet.

That’s according to Bernard M. Markstein III, vice president of forecasting and analysis for the National Association of Home Builders. He spoke at the monthly meeting of NAIOP Commercial Real Estate Development Association in Albuquerque. He was joined by John Covert, director of Colorado-New Mexico Metrostudy.

The local housing market still needs to go through some adjustment and there will be downward pressure on housing prices here, Markstein said. From June 2003 to June 2009, housing prices rose by 39.2 percent in Albuquerque and 40.9 percent in New Mexico, while they were up just 24.5 percent nationally.

That said, Albuquerque is still good on affordability, with a 73.8 score on the housing opportunity index, which measures affordability. The U.S. is at 72.3. Santa Fe is at 54.3, indicating how much more expensive that market is.

Covert said he thinks the housing market here has reached bottom. The excess supply in the Albuquerque market is slowly getting better, he said. But new homes are making up a smaller percentage of sales than they did at the peak in 2005 when they represented 30 percent of home sales. Now they represent 15 percent, Covert said.

Quarterly home starts peaked at 8,100 in 2005. In the third quarter of 2009, there were 1,300, although Covert expects that will rise to about 1,500 by the fourth quarter.

“That’s a huge drop-off in housing starts,” he said.

There also has been a dramatic shift in pricing over the past five years. About five years ago, 75 percent of new homes were below the base price of $200,000. At the peak of the market, only 25 to 30 percent of new homes were in that range. Albuquerque needs to “repair the buyer pool,” Covert said. Now, about half of all new homes are priced at $200,000 or under, so the city is starting to balance that supply a bit better, he added.

There are much higher levels of supply for homes that are finished, but standing vacant, in the $400,000 or higher price range, he said.

Covert did promise there are brighter days ahead for the state, and Markstein said New Mexico is one of the states the NAHB calculates will get back to normal more quickly after the recession.

Senior Housing

Reports CityFeet, traditionally considered a recession-proof sector, the senior housing market is starting to become a bit strained under the weight of the downturn. On the performance side, vacancy rates are going up, while the tough conditions have forced developers to sideline or stall projects.

As with most other commercial real estate sectors, the lack of liquidity is the number-one challenge for those in the seniors housing niche, according to Jones Lang LaSalle’s 2010 outlook for the segment. The weak housing market, which makes some older homeowners hold off on selling their properties in favor of senior living, is also playing a major role.

The good news, however, is that significant technological advances and new architectural designs will play a role in maintaining the segment’s strengths as discerning seniors will increasingly demand more innovative amenities.

Over the next two decades or so the number of seniors in the country is expected to more than double to about 75 million. “Society must adapt to this aging population,” remarks Michael Berne,
head of JLL’s seniors housing capital markets team.

Once the credit markets stabilize, JLL believes demand for the various types of senior housing—independent living, assisted living, skilled nursing facilities, dementia facilities and continuing care retirement communities—will rise. The one difference is that the amenities offered at these properties will be significantly different than those found today. Specifically, there will be more technological advances, medical and medical-related programs and more creative design—most of which will be products of residents’ desires.

In terms of design, senior facilities of the future will look less like sterile institutions and more like homes, fostering the ability for residents to socialize in a warm comforting community environment. Light, sound, water and greenery will all play major roles, as will the acceptance of pets.

Kelly LeMon of Albuquerque’s American Property Consultants & Appraisers, remarks that from 2007 to 2008 there has been a rise in failing assisted living properties across the country. Higher unemployment rates have meant that more people are taking in their parents instead of placing them into facilities. And recently, inexperienced operators have bought properties which subsequently failed.

Real estate sales are down and CAP rates have risen 2% in one year. Typical CAP rates are now around 10.25%, including FF & E, business and real estate . Operating expenses tend to run around 75% of income in a mid-sized facility of around 12 beds.

LeMon recommends that anyone considering buying an assisted living facility should make sure the facility is licensed. Also consider if the previous owners were professionals, such as nurses, and will require additional staff salary to be replaced. Check with the state to see if any complaints have been filed against the facility. And senior centers can provide typical pricing of services.

Contact Samantha Clark at samantha.clark@coldwellbankerlegacy.com

or 505.401.1561

To remove your name from our mailing list, please click here.

Questions or comments? E-mail us at samantha.clark@coldwellbankerlegacy.com
or call 505-293-3700 (office).

Clark's e-news: Real Estate Markets

2009-10-23T11:40:00.000-06:00

Clark’s e-news

Samantha Clark, Associate Broker

Real Estate Services

Real Estate Markets

Reports the Wall Street Journal, new data suggest that foreclosures are rising in more expensive housing markets.

About 30% of foreclosures in June involved homes in the top third of local housing values, up from 16% when the foreclosure crisis began three years ago, according to new data from real-estate Web site Zillow.com. The bottom one-third of housing markets, by home value, now account for 35% of foreclosures, down from 55% in 2006.

The report shows that foreclosures, after declining earlier this year, began to accelerate in the late spring and that more expensive homes have more recently accounted for a growing share of all foreclosures. "The slope of that curve in recent months is much sharper than it was recently," said Stan Humphries, chief economist for Zillow. Rising foreclosures among more-expensive homes could create added pressure for a housing market that has shown signs of stabilizing in recent months as sales of lower-priced homes pick up.

Note—This is creating a unique situation for move-up buyers. For those folks who desire a more expensive house, now is an ideal time to sell and find a bargain among the upper end of the housing market.

Commercial

Remarks Bloomberg, Canada’s commercial real estate market is recovering after an 18-month slump as new transactions indicate the industry has de-coupled from its struggling U.S. counterpart, the Globe and Mail reported.

Investments in commercial property in the Greater Toronto Area rose 46 percent in the third quarter from the previous period to C$1.31 billion ($1.27 billion) and the number of transactions increased by 20 percent, the newspaper said today, citing RealNet Canada Inc.

Reuters - A top White House economist said on Thursday that the tough climate for commercial real estate was a concern but, in contrast to the collapse of the residential property market, it was a more manageable threat.

"This is a slower, evolving problem, so it is one that we will have the time and ability to deal with," Christina Romer, chairwoman of the White House Council of Economic Advisers, told the congressional Joint Economic Committee during testimony on the economic outlook.

"I know the Fed and the Treasury, we are all concerned by what we see happening in commercial real estate," she said.

Home Sales Gain

Bloomberg -- Sales of existing U.S. homes surged a record 9.4 percent in September as Americans rushed to take advantage of a tax credit for first-time buyers before it expires next month.

Purchases rose to a 5.57 million annual rate, more than forecast and the highest in more than two years, the National Association of Realtors said today in Washington. The median price fell at the slowest pace in a year as the number of houses on the market shrank.

While sales may cool unless Congress decides to extend the $8,000 credit due to expire Nov. 30, lower prices and mortgage rates have also made houses more affordable and may cushion any decline. Smaller price decreases show the market is stabilizing as demand improves, easing the strain on consumer finances that deepened the worst recession since the 1930s.

“The excess supply of unsold homes has declined a lot and this reduces the downward pressure on home prices,” said Harm Bandholz, an economist at UniCredit Global Research in New York. “An improvement in house prices is an important condition for an increase in housing wealth and therefore higher willingness of households to start spending again.”

Record Gain

The September increase in combined sales of single-family houses and condominiums was the biggest since comparable records began in 1999.

A recent report showed sales of existing single-family homes climbed 9.4 percent, the biggest gain since 1986, to an annual rate of 4.89 million. Sales of condominiums and cooperatives increased 9.7 percent to a 680,000 rate.

Purchases increased in all four regions, led by a 13 percent surge in the West. Purchases climbed 9.6 percent in the Midwest, 9 percent in the South and 4.4 percent in the Northeast.

Purchases of previously owned homes, which make up more than 90 percent of the market, are tabulated when sales close and therefore reflect contracts signed a month or two earlier. Sales of newly built residences, which make up the rest, are counted when a contract is signed, and may therefore cool months before the tax credit expires. Buyers must close before the Nov. 30 deadline to be eligible for the tax credit.

Contact Samantha Clark at samantha.clark@coldwellbankerlegacy.com

or 505.401.1561

To remove your name from our mailing list, please click here.

Questions or comments? E-mail us at samantha.clark@coldwellbankerlegacy.com
or call 505-293-3700 (office).

Clark's e-news: Commercial Loans

2009-10-16T11:05:00.000-06:00

Clark’s e-news

Samantha Clark, Associate Broker

Real Estate Services

Commercial Loans

Feel like getting out for a fall drive into the mountains to view the changing leaves? The US Forest Service provides weekly guides for around the country. Check out New Mexico. While the northern part of the state is already past its best foliage, Sandia Crest by Albuquerque is at peak viewing this week. And southern New Mexico is just going into it’s fall prime.

Commercial Real Estate Loans

Reports the NY Times, a year after Washington rescued the banks considered too big to fail, the ones deemed too small to save are approaching a grim milestone: the 100th bank failure of 2009.

While the parade of failures still represents a mere fraction of America’s small banks, it underscores a growing divide between them and large institutions like Goldman Sachs, JPMorgan Chase and U.S. Bancorp, which are slowly growing stronger as the economy improves. Burdened by worsening commercial real estate loans, many small banks’ troubles are just beginning.

The initial wave of failures has also unsettled some communities, even though most of the troubled institutions have been bought by other banks rather than shuttered. While deposits are safe thanks to federal insurance, the new buyers often do not have the same ties to local businesses as the former owners.

Regulators expect closures to ripple through hundreds of small banks over the next couple of years, especially in the Midwest and Southeast, where lenders have been hard hit by the recession.

These banks loaded their balance sheets with loans to home builders and other property developers to make up for lost business in credit card and mortgage lending that bigger competitors wrested away. They eased their lending standards during the boom years and made big bets on new housing developments, strip malls and office projects. Now, many of those deals are falling apart, and the lenders are scrambling to raise capital to cushion the losses.

The banking system may be facing a long recovery. About $870 billion, or roughly half of the industry’s $1.8 trillion of commercial real estate loans, now sit on the balance sheets of small and medium-size banks like these, according to an analysis by Foresight Analytics, a research firm. For most of the banks, this represents the biggest and riskiest part of their loan portfolio, since they lack the trading streams and fee businesses of their larger rivals. And as a group, small banks have written off only a tiny percentage of the losses that analysts expect them to incur.

By contrast, commercial real estate losses put none of the nation’s 19 biggest banks, and only about 5 of the next 100 largest lenders, in jeopardy. Even Citigroup, the biggest and most troubled of the banks, has a relatively small portion of its loans tied to commercial real estate and may begin to recover faster than other rivals.

But even if hundreds of banks collapsed, they would not threaten to bring the financial system to its knees.

Together, the 8,176 smallest banks control just 15 percent of the industry’s $13.3 trillion in assets. And thanks to the expansion of the government’s deposit insurance program, regulators also appear to have squelched the threat of bank runs that brought down IndyMac Bank and Washington Mutual last year.

Hospitality in Worst Shape

Reports the CoStar Group, the late-summer pause in the climbing number of borrowers who are defaulting on their securitized commercial real estate loans appears to be over. Weakness in the battered hospitality sector is fueling more delinquencies and defaults on commercial-backed mortgage securities (CMBS) and collateralized debt obligations (CDOs), which resumed their rise in September after a couple months of modest decline.

In another report, Credit Suisse said installments on $22.4 billion of commercial real estate mortgages became at least 60 days late in September as borrowers failed to make debt payments -- a 600% increase from $3.2 billion a year earlier. Defaults and foreclosures and resulting losses on deteriorating commercial real estate loans are the biggest threat to U.S. banks.

"After tapering off for two months, the delinquency tracker appears to have resumed an upward trend as expected," says Moody's Managing Director Nick Levidy. "The delinquency rate is likely to continue moving higher over the next several months as troubles compound in the commercial real estate sector."

"The recent surge in hotel defaults is consistent with Fitch's view that hotel
property values will decline by as much as 50% from peak levels," said Susan Merrick, Fitch managing director and head of the U.S. CMBS group. "While budget hotels have fared best during the downturn, continued pressure on the luxury, resort, and gaming sub-sectors will likely push lodging delinquencies to approximately double that of the other property types."

The hotel sector also posted the largest increase among the five property types tracked by the Moody's delinquency index in September, resuming its climb after a small decline the previous month with a 79-bp increase to a 4.97% rate. The multifamily sector posted the second largest increase, rising 58 basis points to a level of 6.09%, the highest of any property type.

Retail properties had a 34 basis points increase to 3.76%, industrial saw delinquency rates gain 21 points to 2.67%, and office properties increased 29 points to 2.30%. Four of the top ten largest newly delinquent loans are backed by office properties.

Contact Samantha Clark at samantha.clark@coldwellbankerlegacy.com

or 505.401.1561

To remove your name from our mailing list, please click here.

Questions or comments? E-mail us at samantha.clark@coldwellbankerlegacy.com
or call 505-293-3700 (office).

Clark's e-news: Rural Mixed-Use

2009-10-02T14:24:00.000-06:00

Clark’s e-news

Samantha Clark, Associate Broker

Real Estate Services