Paper Money - A US Real Estate Bubble Blog

Commercial Calamity? S&P/GRA Commercial Real Estate Index September 2008

Posted: 02 Jan 2009 08:03 AM CST

Standard & Poor's tracks commercial real estate (CRE) prices for various commercial property types.

Today's results indicate that the commercial real estate decline has firmly arrived and it is notable with a marked decline for most components with three of the four now showing annual declines resulting in the third consecutive year-over-year decline to the total index, marking the first such decline in the indexes history.

It's important to keep in mind that this decline is coming from data that was settled well in advance of the historic stock market and wider macroeconomic crisis which, in all likeliness, will result in significant additional downward pressure on commercial real estate prices.

Clearly, commercial real estate, having already matched and surpassed the level of decline seen after the dot-com bust, now sit poised on the verge of an unprecedented slump.

The charts below show the National index and the component indices since 1994 (click for larger).

NOTE: S&P has advertised that this particular index will now be discontinued… I'm following up with a phone call and will update this post with details.

In future months I'll continue to post the MIT/CRE and Moody's commercial property indices in order to get a sense of CRE market pricing conditions.

Ticking Time Bomb?: Fannie Mae Monthly Summary November 2008

Posted: 02 Jan 2009 07:28 AM CST

Decades from now the summer of 2008 will likely be remembered to mark the turning point where legislative blundering took an otherwise serious financial crisis and molested it into an epic financial collapse.

By fully assuming the liabilities of Fannie Mae and Freddie Mac, the two colossal and corrupt (and conduit of corruptness funneling junk Countrywide Financial loans onto the implied balance sheet of the federal government) government sponsored enterprises, the federal government, led by Treasury Secretary Paulson and Federal Reserve Chairman Ben Bernanke, has thrust taxpayers into an abyss of insolvency with one mighty shove.

Given the sheer size of these government sponsored companies, with loan guarantee obligations recently estimated by Federal Reserve Bank of St. Louis President William Poole of totaling $4.47 Trillion (That's TRILLION with a capital T… for perspective ALL U.S. government debt held by the public totals roughly $4.87 Trillion) this legislative reversal making certain the "implied" government guarantee is reckless to say the least.

The following chart (click for larger) shows what Fannie Mae terms the count of "Seriously Delinquent" loans as a percentage of all loans on their books.

It's important to understand that Fannie Mae does NOT segregate foreclosures from delinquent loans when reporting these numbers and that should they report the delinquent results as a percentage of the unpaid principle balance, things might likely look a lot worse.

Finally, the following chart (click for larger) shows the relative movements of Fannie Mae's credit and non-credit enhanced (insured and non-insured) "Seriously Delinquent" loans.