Thursday, August 6, 2009

Commercial Mortgage Originations Rise From Depressed Levels

Commercial Mortgage Origination data for Q2 '09 was released today by the Mortgage Bankers Association today, via a report that can be most accurately summarized as follows: Commercial mortgage origination's log a strong quarter in percentage terms due to the infinitesimally small base reached in the first quarter of 2009.

Bulls will be quick to point the impressive headline month-to-month increase in commercial mortgage lending activity; but don't be fooled. The chart above should put the quarter's origination activity in it's proper perspective, as the heyday of '06-'07 appears a long ways off. Of course, to use 2006 as a benchmark of any sort in terms of future lending levels is entirely misguided, as the level of securitization juice running through those numbers was the anabolic steroid equivalent of Barry Bonds X3. For clarification purposes, the "Originations Index" operates off of a scale similar to the way the Case-Shiller House Price data is presented, with the 2001 quarterly average corresponding to a value of "100". As a side note, I had a lot of pseudo-analysts preaching to me, as recently as late 2007, that health/medical properties were "the way to go". At the time I dismissed the comments as faux-market analysis (which they were), but in retrospect I should have immediately taken the cue that another bubble had formed. Just look at the meteoric rise in health/medical originations; cliche boomer-demographic justifications aside, medical properties were not based in reality.

I hate to keep hammering at the Government for the perverse role that it continues to play in virtually every industry/market, but it is unavoidable given this quarter's stats. Towards the latter part of the MBA report, the quarter's commercial mortgage originations are classified according to the entity providing the mortgage. Below I've listed the year-to-year change in commercial originations by each "entity" listed in the report:

Commercial Banks:-83%
Life Insurance Companies:-54%
Fannie Mae/Freddie Mac:+2%

Why do my tax dollars have to go towards funding a Government that continually proves itself to be the dumbest money in the room? Sphere: Related Content

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