Commercial mortgage lending down 54%

Washington Business Journal ^ | November 5, 2009 | Jeff Clabaugh

[george76]

Commercial and multifamily mortgage lending in the U.S. fell 12 percent from the second quarter to the third quarter and is down 54 percent from year ago levels...

The drop includes a year over year decrease in lending for all types of commercial properties. Loans for retail properties are down 62 percent. Loans for office properties are down 56 percent, MBA says.

company downsizing has dampened demand for new office space across the country.

[cranked]

Because the lenders know that the commercial properties bubble is about to burst.

[DonaldC]

Bubble bursting or not, who would be building in this climate?

[cranked]

There are areas and/or zones of commercial building that are still profitable.

At any rate, the real issue of the bubble bursting is not necessarily those building in this climate...it is those existing mass of commercial properties that remain vacant or oare being vacated.

[dirtboy]

Where is your head, man? We need to jump-start the economy by lending money to builders to add to the already-bloated inventory of condos and strip malls.

[cranked]

lulz :)

[JasonC]

Um, it already burst, long since.

Fed flow of funds dataset aka Z.1 release
Balance sheet of corporate sector
Latest release
Line item, real estate assets
date end of 2007 amount, $9.0657 trillion
date end of 2Q 2009 amount, $6.5623 trillion

Balance sheet of non-corporate business
end of 2007 amount, $8.0196 trillion
end of 2Q 2009 amount, $6.6037 trillion

thus
business real estate assets end of 2007, $17.1 trillion
business real estate assets end 2Q 2009, $13.2 trillion
deline in real estate assets to date $3.9 trillion = 23%

Might it still have 1-2 quarters to go and end at a draw-down around 1/3rd rather than 1/4th? Sure. But pretending it is still going up is silly, commercial real estate has been smashed already, since the end of 2007.

What is true is investment in commercial remained strong for about 6-9 months longer than residential, as the same construction capacity sought other uses when the residential home market shut down. But that has stopped too, by late last year at the latest.

A decline of $4 trillion in commercial property values is hardly immaterial. The bulk of the hit has already happened.

[JasonC]

Construction spending is more diverse than journalist level commentary in the business press typically lets on.

Residential construction is currently running at a $264 billion annual rate, which is down 26% since this time last year.

Office is running $54 billion, which is off 26%, and retail commercial space is running $54 as well, which is off 34%. Hotel space is a smaller line item, currently $18 billion which is off 37%.

But non-residential construction includes $105 billion for schools and universities, and that line item is unchanged. It includes $90 billion for power plants and transmission lines, and that is up 8%. It includes $86 billion for roads, up 3%, and $38 billion for other transportation infrastructure, up 11%. It includes $74 billion for manufacturing, also up 11%. It includes another $61 billion for other utilities (communications, water and sewer), down modestly. Another $48 billion for hospitals and other medical, unchanged. Etc.

Large swings in $150 billion of the total don't move the overall very much, because it is $700 billion. Yes the overall amount is down, but like 7%, simply because lots of the line items aren't sensitive to the cycle at all. Transportation, education, health, and utilities are not swinging with expected consumer spending or financing issues; since they are paid practically as prior charges they move only very slowly.