Mortgage Rate News

Commercial real estate has been barely hanging on in some areas (although Detroit is famous for its “dead” malls already). However, with a deepening economic recession, things can’t keep limping along for much longer. Indeed, there are two main issues that are likely to affect commercial real estate in the near future:

1. Slumping retail sales and consumer confidence mean empty storefronts.
2. Changes in corporate attitudes mean reduced need for office space.

These two items, combined, are leading up to a commercial real estate collapse. Commercial real estate hasn’t seen the same problems that are affecting residential real estate, but some feel that it is only a matter of time.

Retail sales decline

Retailers have been making up lost ground since November, when things got really ugly. However, retail sales are still sluggish and consumer confidence is low. As stores find it hard to stay open, they will (obviously) close. This means empty stores in malls, as well as empty buildings on busy street corners. A glut of commercial retail space will send prices down, affecting the entire commercial real estate sector.

Corporate office space

Another development leading to empty — and near-empty — buildings is likely to be changes in the way corporate office space is used. Indeed, with an increased emphasis on telecommuting, it is no surprise that office space is no longer as necessary as it once was. Subprime Blogger reports on this shift in corporate practice:

To compound matters, commercial office space is going to become abandoned as well.  Many corporations are downsizing and asking individuals to work from home as they do not want to incur the costs of renting office space.  Cutting the cost of office space could save some companies millions of dollars, so it is likely that this is going to happen sooner than later.  All those office buildings that were erected during the last three years are going unrented because the business of America has changed.

It is clear that the real estate bubble hasn’t completely popped yet. We’re still waiting for the commercial real estate shoe to drop.

Image via CrunchBase

Any number of pundits and others make fun of Twitter. My husband makes fun of Twitter. He just doesn’t “get” it. Some days, I don’t know why I am doing it, either. And then I get a job lead or some other benefit, and my faith in Twitter is renewed. Today, I found yet another story to promote the use of Twitter: An irate borrower in Australia was able to get a mortgage fast tracked after posting a complaint on Twitter.

After more than a month of frustration with Commonwealth Bank, one borrower got frustrated and mentioned it on Twitter, reports news.au.com:

The post said simply: “CBA f#$&ked up our loan approval so we’re still waiting to exchange contracts”.

One hour and 17 minutes after it went live I was contacted by someone offering help to solve my problem. That person was the head of Commonwealth Bank’s customer service team.

He told me the message made him “feel like crap” and the bank was only just beginning to understand how crucial social media sites were in maintaining the corporate giant’s image. By 3pm the next day, my loan was formally approved.

It appears that Twitter is the new customer complaint line.  Indeed, it does far more damage than a phone line for customer complaints. Hundreds — or even thousands — of people can read about how something isn’t going right, and for a company that can be a big deal. Social media is rapidly changing the way business is done, and that includes the way mortgage lenders handle things. Of course, if everyone in the backlog started tweeting their own dissatisfaction with a mortgage process, it might crash the system (fail whale!) — and it wouldn’t ease the backlog.

But, for a few isolated cases of savvy social media use, Twitterers can effectively improve the type of service they receive. As long as the mortgage lender is plugged in as well.

It’s turned into kind of a joke: “Failure Friday” has become a staple on many finance and mortgage blogs. Friday seems to be the day that regulators seize failing banks, and in the current climate, some people really like to hear about these failures. Failure Friday is almost an official term. I haven’t really got the whole Failure Friday thing here, but this week marks the 21st bank failure of 2009, and I thought I’d share something I’ve run across.

Of course, right now it’s more of a rumor. Bloomberg announced that Omni National Bank in Atlanta was seized. The FDIC, however, has not yet commented. So it will be interesting to see if it’s true. There were branches in Illinois, Texas, Georgia and Florida. Additionally, Pennsylvania and Alabama had loan offices.

I thought it might be interesting to show this handy interactive map offered by The Street:

As you can see, failed banks are costing hundreds of billions of dollars, but we’re still a ways from $1 trillion. Some analysts think that we’ll eventually get there, but I’m not so sure. After all, serious efforts are being made to get toxic assets off of major banks, and there are hopes that economic stimulus efforts will result in more liquidity and fewer bank failures.

It’s interesting, though, to see the concentration of bank closings. For the most part, the bubble real estate markets of recent years have seen the most bank closures. It seems as though bank failures are following along with the fate of the real estate markets they are in. This does make sense — since many banks are failing as the mortgages they hold go into default. I know that the single bank that has closed here in Utah is one that was heavily invested in builders and recent boom in Salt Lake City real estate. I’d imagine that there are similar patterns elsewhere.