By Heather Soldonia
More scary than mummies, black cats, or cobwebs is the looming question: Has the real estate market bottomed out?
We REALTORS® have been asking Congress “Trick or Treat? … Please come up with some creative ways to revive the real estate market. Pretty please?”
When Forbes reported the 10 worst real estate markets of 2009, eight were in California. Currently, the unemployment rates are still above 12 percent in California — and remember that unemployment rates are only determined based on the number of people still receiving unemployment benefits — it doesn’t include in its calculation those who have received the maximum amount of unemployment benefits and now have absolutely no income.
Obviously, we can understand why so many mortgages are still going unpaid. In California, default notices have dropped by 10 percent, but that is specifically because lenders are modifying loans and/or short selling.
That being said, let’s take a quick moment to consider how the unemployment rate effects commercial real estate: In the Financial District of San Francisco there is nearly 1 million square feet of office space sitting empty. That means no lease payments, which means landlords’ inabilities to meet their mortgage payments, which means… NO BUENO!
Was anyone surprised when we learned that it has officially been determined that the FDIC failed to enforce its own guidelines for commercial real estate lending? The most recent Beige Book report released last week from the Federal Reserve Bank reports that defaults on commercial real estate loans totaled $110 billion, or 6 percent of all such loans. Declining real estate values combined with rising vacancy makes for a potential commercial real estate bust.
TRICK: We have U.S. Treasury Secretary Tim Geithner telling us that the economy can withstand the looming commercial real estate bubble waiting to pop.
TREAT: Most of us are in the residential sector where we’re beginning to see the glimpses of a recovering market. And we’ll most likely see Congress clear the extension for our buyers’ tax credit next week.
Heather Soldonia is a Broker/REALTOR® in the San Francisco Bay area with Windermere Welcome Home. She can be found at www.heathersoldonia.mywindermere.com.