Fed plans on loans up to $200 billion

The Fed’s action is seen as an attempt to promote liquidity in credit markets and help sure up MBS.  As a result the stock market was up 416 points yesterday.  For a day everyone seems to be happy.  However, when I listen to various professionals and speakers and they give their take on the state of commercial real estate several thing s are being very clear in the long term:

1. There seems to be no doubt anymore that the Sub-prime crisis spelled over into commercial real estate.

2. Global investors can take the hit created by the Sub-prime melt down.  It is however an entirely different question if they could handle both a residential and commercial real estate hit in the U.S.

3. We are seeing the beginnings of a double digit loss of value in commercial properties on the West coast and Florida.

4. The real estate credit crisis will be worse with a recession.

5. We are seeing investors looking to purchase troubled properties, development is slowing.  Residential development is near dead.

6. There is a general perception in the real estate community that Texas will escape the effects of the financial crisis.  Some how Texas will be a island of stability in a possible global credit crunch.  (I personally don’t agree.  I believe some areas of the country may fare better than others however I think everyone will be affected.)

I am of the opinion that the intervention by governments may or may not be a good thing for real estate.  Investments have risk and I believe the market should work its issues out not the government.  However with that said, that is not the world we live in.  Our government seems to be reactionary and not proactive.  Do they not believe in real time oversight?  Red flags occurred when residential loans were made to people with bad credit histories.  Lenders should not have not have made those loans and MBS should not have bought those loans.  Further, appraisers failed the system when their appraisals reports were produced to make the loans go through rather than report market value.  Mortgage companies should not been allowed to have any business relationship to appraisal firms, such as subsidiaries that provide appraisal services.  Look for the Federal Government to increase the regulations of appraisers as they did after the S&L Crisis.  We are currently seeing the State of New York taking such actions.Â