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Two Ways: Terra Not Firma for Commercial Real Estate


Strengthen your portfolio in good times and bad.

Commercial mortgage delinquencies rose to an 11-year high in April as credit conditions made it difficult for landlords to refinance loans.

A Bloomberg story citing property research firm Trepp LLC reports the percentage of loans that are delinquent by 30 days or more rose to 2.45% - nearly double the rate 5 years ago, and the highest since the firm began keeping records in 1998.

From October of 2005 through November of 2008, the delinquency rate remained just under 1%. But recently apartment delinquencies began to surge. After rising to 3.84% in March, they jumped to 5.24% in April.

Yesterday, Federal Reserve Chairman Ben Bernanke acknowledged the poor conditions in the commercial real estate sector. "There's a large amount of CRE financing coming due in the next year or two," he said, "and we need to have that market functioning so that can happen smoothly."

Is the market simply counting on Bernanke to save the day?

Revisit Professor Fil Zucchi's A Commercial Real Estate Comeback?

From the Bull Pen: We'll get more of an idea of mutual fund flows tomorrow morning, but the recent trend has been increasing risk appetite. Watch how the S&P 500 acts into 875-880 (previous resistance which now should act as support).

From the Bear Cave: There's considerable danger when applying technical analysis to the leveraged ETFs. Nonetheless, if one does believe that the commercial real estate sector is ready to fall, the Ultrashort Real Estate ETF (SRS) may be an option. Keep your sell stops tight!

Thirsty Thursday, Minyans. Time for a well-deserved happy hour. Have a great night!
No positions in stocks mentioned.

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