An incredible dynamic is now occurring within real estate. As many writers and market watchers have observed, and we practitioners are living, credit markets and politics are impacting commercial real estate far more than market forces these days.
The Term Asset-Backed Securities Loan Facility -- better known as TALF -- was designed to help the residential market by helping market participants meet the credit needs of households and small businesses by supporting the issuance of asset-backed securities collateralized by student loans, auto loans, credit card loans, and SBA guaranteed loans. As a result, the various Federal Reserve banks lent more money to banks, so that they could lend more money for real estate transactions.
Today, while it did bring some credit spreads in to help commercial transactions a bit, it did not do much. In this writer's humble opinion, another government program that got in the way. What Washington really needs to do is get out of the way, in my opinion.
What will make keep commercial/investment real estate healthy is less intervention by federal officials. Already we are seeing monkeying around taking place with loan loss reserves at other wise healthy financial institutions. This pressure, in turn, puts pressure on borrowers. Not just future borrowers, but those who already have loans outstanding.
Residential real estate appears to be bottoming out. But what is to happen with the commercial/investment sector remains to be seen. Everyone says the big turnaround for commercial real estate will be in 2011. I am thinking 2012 but who knows. Still, it is a good time to buy. Money is cheap (for now) and manyh distressed properties are out there waiting for a good owner and good management.
Just some thoughts on a Sunday.