CMBS Still Dominated by Government Agency Deals After Commercial Real Estate Bubble Burst

Confounded Interest ^ | 11/30/2012 | Anthony B. Sanders

[whitedog57]

I was on Fox News with Tom Sullivan yesterday to discuss the housing “recovery.” Rick Sharga (formerly of RealtyTrac and now Carrington Mortgage Holdings) was the guest before me and said that we are witnessing the sustainable recovery of the housing market. I simply pointed out that the “recovery” thus far is dominated by hedge funds, corporations, cash transactions and foreign investors and not the traditional family purchase of housing. So, it may be a recovery, but not your father’s Oldsmobile (so to speak). And don’t forget the fiscal cliff and the large volume of foreclosed properties about to hit the housing market!

In terms of residential mortgages, the Federal government has about a 90% share (insurance, mortgage purchases). In fact, a recent study from the Government Accounting Office (GAO) recommends MORE consolidation of housing programs and new opportunities for housing assistance. The Federal government does have numerous and overlapping housing assistance programs.

As we look for a “recovery” of the commercial mortgage-backed securities (CMBS) market, we see that the Federal government dominates this market as well relative to the conduit CMBS deals of the past. Agency CMBS deals are Ginnie Mae, Fannie Mae and Freddie Mac multifamily loan deals.

Here is a partial list of recent CMBS deals, mostly Agency.

Of course, you can why the government (particularly FHA and Ginnie Mae) are the “last man standing.” The commercial real estate market had a bubble and burst as well.

In the Washington DC, Northern Virginia and Maryland area, office Real Estate Owned (REO) reflects the problems still haunting the commercial real estate market.

So, the Federal government is now the Big Dog in both residential and multifamily housing finance. Not a lot of activity elsewhere … yet.

[whitedog57]

Economist showing how the government has taken over the housing market.

[KeyLargo]

Yes, I was puzzled by all of the financial talking head programs, including Kudlow and Cavuto with guests talking up the home housing market and how things are looking up.

I don’t believe any of it.

From what most of us have seen is our neighbors home mortgages underwater and for sale signs dotting the areas.

[wmfights]

Yes, I was puzzled by all of the financial talking head programs, including Kudlow and Cavuto with guests talking up the home housing market and how things are looking up.

It's a question of perspective. Things are looking up compared to 08-09. However, residential real estate will not jump back to 05 levels because of demographics and a lack of lending, so a lot of people are going to be surprised to see their values stagnate and actually decline as inflation rises faster than value.

The idea of buying residential real estate as an investment should be discredited. The only reason to buy residential real estate is because you want to live there.