Citing data from Commercial Mortgage Alert, a trade publication, the FT reports that issuance of US commercial-mortgage-backed securities fell to $6.3B in October, down 84% from a record $38.5B in March. The paper adds the sharp contraction is particularly of concern when considering that these securities have provided an estimated 40%-60% of funding for new commercial property purchases in recent years. According to the article, Moody’s index of commercial real estate prices is expected to reveal that prices leveled off or even fell in September, after rising 14% in the 12 months through August. In addition, the FT points out that RBS Greenwich Capital is predicting that US commercial property prices will fall 10%-15% next year. The article goes on to note that the upheaval in the credit markets is also raising the cost of commercial mortgage borrowing, as the spread on AAA-rated CMBS has more than doubled since June, reaching its highest level since Oct-98.
Financial Times: Credit crisis spreading to commercial mortgage market
Posted in * Economics, Politics, Economy
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