Nouriel Roubini, “Dr. Doom” who predicted the 2008 crash, is reported to have now tweeted that the next dip will be “uglier than ugly … off the scale bad.”

Would the apartment sector, which just saw a strong turnaround in occupancies beginning last year, have to say goodbye to its good fortunes? So soon?

Someone commented in a blog that investors know economics, and hence it was not surprising that the stock market plunged, not rose, immediately after President Obama signed the bill that would cut federal spending by $2.4 trillion.

There seems to be the notion that the federal deficit is somehow responsible for a weak economy, and by implication, the stubborn unemployment levels. And that therefore, as President Obama suggests, the top priority today is to reduce the federal deficit: Corporations are not expanding because they see the federal deficit and so have no “confidence,” to expand and hire more workers.

I don’t know about you, but I don’t think a company would not expand and hire workers because it sees the huge federal deficit.

Rather, it seems more likely businesses are not expanding because there is no strong consumer demand for their goods.  And that consumer demand can be boosted by government spending in the short run at least. Government handouts, for example, will be spent by struggling consumers immediately. 

By Keat Foong, Executive Editor

At CRE Finance Council’s June convention held in New York last week, some financiers were saying that CMBS standards are already slipping, very quickly.

More lenders are entering the CMBS space, seemingly bullish about the prospects for a robust volume of lending. That drive for business, however, creates fierce competition among these players.

“Unfortunately,” the “race to the bottom” is already upon the market, said one speaker. The players are “nearly repeating the mistakes of the past.” Pricing is being being squeezed again, until the pull backs in the last week. When one lender offers interest-only financing, others feel obliged to follow.

Yes, but we are not back to CMBS 1.0, yet, others argued. The quality of the CMBS-financed is still very solid, maintained one speaker. Underwriting has not become “crazy,” and LTV still hover around 65 percent. And it seems the buyers of the CMBS B-pieces, who were badly burned in the last cycle, will impose ultimate discipline on the market, as they can kick out loans that they deem unacceptable. Indeed, it seems CMBS is still not available to the middle market.

Meanwhile, borrowers, at least of the top deals, know lenders are hungry to make loans. They are asking for I/Os, for example‑and getting them. For multifamily, CMBS is merely one more financing option that may be coming into play now.

By Keat Foong, Executive Editor

The CMBS delinquencies rate dropped in May by the biggest amount in two years.

The percentage of loans that are 30+ days delinquent, in foreclosure or REO fell by 5 basis points to 9.60 percent, according to Trepp LLC. The value of delinquent loans is now $61.5 billion, says Trepp.

“While there may be additional bumps along the way, we think the May numbers accurately reflect a leveling off in the market,” says Manus Clancy, managing director of Trepp.

The delinquency rates for industrial and office property loans worsened, although office property loans had the lowest delinquency rate at 7.23 percent. Delinquencies in all other major property types declined for the month, says Trepp.

By Keat Foong, Executive Editor

Delinquencies rates remain high, though there is light on the horizon. The CMBS conduit/fusion delinquency rate is now 9.22 percent, an increase of six basis points, according to Moody’s Investors Service.

To place it in perspective, Fannie and Freddie’s multifamily delinquency rates come in below 1 percent, while the CRE delinquencies of life insurance companies are about 4 percent.

“We expect the delinquency rate to run high-single to low-double digits over the near term,” states Tad Philipp, director – CRE Research, of Moodys Investors Service. “The resolution process is in full swing, and liquidations should roughly balance new defaults.”

The total dollar balance of delinquent loans for the US declined for the second straight month in April. But CMBS conduit/fusion loans outstanding fell by over $5 billion in April, leading to the uptick in the delinquency rate.

During April, loans totaling $2.9 billion became newly delinquent, while previously delinquent loans totaling approximately $3.0 billion became current, worked out, or disposed of, says Moody’s. In all, the total number of delinquent loans decreased to 4,047 in April from 4,097 in March.