In an exclusive interview, Grubb & Ellis chief economist Bob Bach told CPN that his firm is predicting a 40 percent decline in commercial real estate transaction volume this year compared to 2007. \u00a0A big reason for the prediction is a survey of lending officers at large banks, done by the Federal Reserve and released in January. The survey notes that 80.3 percent of such loan officers are tightening their lending requirements, a figure unequaled in nearly 20 years. \u00a0The credit crunch \u201creally does show up in fourth-quarter sales being down,\u201d Bach said. According to Real Capital Analytics\u2019 figures, the fourth quarter of 2007 saw $82 billion in CRE sales, versus $102 billion in the same quarter a year earlier. \u201cIt\u2019s really quite a dropoff,\u201d Bach commented, \u201cclearly the worst at least since the early \u201990s.\u201d \u00a0Besides the tightening of loan terms over the past six months or so, Bach\u2019s estimate about CRE transaction volume rests on factors such as uncertainty about pricing and concerns about the slowdown in the economy, including its possible effects on net operating income. \u00a0The credit tightening is not an overreaction, Bach said. \u201cThere\u2019s still some rationality in the market\u2026 There\u2019s just a lot of fear out there right now,\u201d affecting the entire credit market, \u201cand CRE has gotten caught up in that.\u201d \u00a0One aspect of the subprime situation\u2019s fallout is that \u201cWe\u2019ve underestimated it so far,\u201d said Bach, recalling last August, when some commentators were predicting that everything would blow over by Labor Day. \u00a0\u201cThe problem,\u201d Bach said, \u201cis this could be a feedback loop\u201d connecting mortgage defaults, the overall economy and unemployment. He also points out that the economy saw an \u201cextended jobless recovery\u201d following each of the last two recessions. \u00a0Fueling the ongoing concerns about the ripples from the subprime mortgage meltdown is a front-page story in today\u2019s New York Times headlined \u201cMortgage Crisis Spreads Past Subprime Loans.\u201d \u00a0The article notes that rising adjustable-rate residential mortgage payments are starting to hike monthly payments out of the reach of even some prime borrowers, while falling home prices make it hard for them to sell and get out from under. Citing figures from the Mortgage Bankers Association, the article reports that nearly 4 percent of prime residential mortgages were past due or in foreclosure at the end of September. And the overall residential-mortgage delinquency and foreclosure rate is 7.3 percent, the highest since the MBA started tracking it in 1979. \u00a0And the article notes though these numbers significantly lag the subprime residential default rate of about 24 percent, other numbers add to the concern about the overall economy. The default rate on home equity lines of credit, for example, rose from 4.5 percent at the end of 2006 to about 5.7 percent at the end of 2007. Defaults on car loans are creeping up too, as are personal bankruptcies. \u00a0Still, Bach wants to keep the situation in perspective: \u201cWhen the fear is at its peak, that\u2019s when you can make money,\u201d he said. \u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"
In an exclusive interview, Grubb & Ellis chief economist Bob Bach told CPN that his firm is predicting a 40 percent decline in commercial real estate transaction volume this year compared to 2007. \u00a0A big reason for the prediction is a survey of lending officers at large banks, done by the Federal Reserve and released…<\/p>\n","protected":false},"author":1314,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1003709937","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"acf":[],"yoast_head":"\n