On a previous blog I addressed the impending issues regarding commercial real estate and foreclosure proceedings in both the Southern Oregon real estate market as well as the national commercial real estate market. The global economic meltdown resulted in consumers collectively tightening their belts and spending less. This reduction in spending had a profound effect on the Southern Oregon real estate market and we soon saw “For Rent or Lease” signs hanging in the windows of vacant commercial buildings. With reduced consumer spending, businesses in mini malls, downtown areas, larger malls, and strip malls began to close their doors, unable to pay their rents due to the slowdown in spending. Now another calamity appears perched to effect commercial real estate in Southern Oregon and elsewhere.

It seems that between 2005 and 2008, billions of dollars of commercial real estate was either sold to a new buyer or refinanced to grab equity. The most popular terms used during this refinancing phase in commercial real estate called for payment schedules based on a 20 year amortization and fully due and payable within 5 years, making the first round of loans initiated in 2005 due to be paid off next year in 2010. For the following three years, loans will continue to come due and payable through 2013 as required by the terms of the contract and agreed to by the borrowers. Unfortunately for the banks, this potentially means 3 years of painful commercial foreclosures as borrowers struggle to come up with the funds necessary to comply with their contractual payoffs. Looking ahead to the next three years, commercial lenders must begin to aggressively address this issue or they will join residential real estate lenders in the challenge of unloading foreclosed property. Ultimately, this could mean steep bank losses, tighter money, and continued challenges for a recovering economy.

But are their solutions to this impending problem? Most certainly, but as the personal trainers say to their clients, “No pain, no gain.” A Federal bailout for commercial lenders seems unlikely, so creative options like mortgage modifications seems the likely first step, and we all know how much fun that can be.

More to come on this pressing issue.

Michael Masters

A Socially Conscious Real Estate Consultant

As it draws to an end, 2009 continues its slow advance toward recovery. We’re probably all in agreement on this one; 2009 has been a formidable year for the economy. The Southern Oregon real estate market joins the nationwide real estate market with unsettled issues regarding the Housing Sector as we approach 2010, and yes, there is good news. The good news for the stock market is that the Dow Jones is inching over the 10,400 mark and appears to be gaining strength. The good news for the housing sector is that the numbers for sales and median home prices have shown steady increases for the last three months in a row. But the overall recovery news is mixed. The unemployment rate has pushed over 10% and is responsible for Continue reading Commercial Real Estate and the Southern Oregon Real Estate Market