Thursday, February 7, 2013

Getting the metrics right............

From David Bodamer's recent post in the National Real Estate Investor:

"The most problematic part of the market was the CMBS sector.  That business essentially evaporated overnight going from originating about $230 billion in loans in its peak year of 2007 to less than $3 billion two years later.  Things finally picked up a little in 2011, and last year marked a post-recession high of about $50 billion.

For those of you who don't care about this sort of thing, CMBS stands for Commercial Mortgage Backed Securities.  The selling, packaging and re-selling of commercial loans was a huge deal in the mid-2000's, both for Wall Street and major real estate players everywhere.  The CMBS market added a tremendous boost to the commercial real estate world by providing financing and liquidity, the life-blood of development.

My question is - which is worse (or better) for the economy in general and real estate specifically:  too much money chasing ill-advised deals and financings, ala 2007; or fewer loans available only for those deals conservatively underwritten, ala 2011?

Setting our eyes on "recovery" looking like 2005-2007, would seem like a big mistake from here.  $50 Billion actually sounds about right.

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