Market Studies

The total value of distressed commercial real estate (CRE) in the United States right now is $186.9 billion, including properties in default, foreclosure, and lender REO, according to data from the research firm Real Capital Analytics. The Transwestern company Delta Associates says this tally represents an increase of 12 percent, or $20.1 billion, since June and means CRE distress has risen back to the level it was in March of this year. But the company says a plateau in the $165-$200 billion range will be the norm for a while.

Moody's Investors Service says U.S. banks have already written off nearly two-thirds of the real estate loans expected to go sour through 2011. The credit ratings agency projects banks will incur $744 billion of loan charge-offs between 2008 and 2011. Moody's analysts say an estimated $476 billion of these losses have already been recognized, leaving $268 billion, or 36 percent, remaining. So far, 68 percent of residential mortgage losses have been accounted for versus 49 percent of bad commercial real estate loans.

Long-term mortgage rates inched up this week, breaking a buyer-friendly trend of successively falling to record-lows week after week for the past three months. The question now is, will the threat of rising interest rates push prospective homebuyers to take a leap? Freddie Mac reported Thursday that 30-year fixed-rate mortgages rose to 4.35 percent this week. Fifteen-year mortgages, on the other hand, came in again at last week's record low of 3.83 percent. Bankrate, however, reported a jump in mortgage rates across the board.

A study released by Clear Capital Thursday shows that quarter-over-quarter home prices were up 5.7 percent in August, compared to the previous month's reading. It's a gain, but the company says price increases are beginning to narrow and appear to be poised for a descent. Even with the slowdown, Clear Capital's assessment is that home prices won't fall below the lows seen in 2009 and bring about that dreaded double dip...at least not until next spring.

Economic growth is still grinding along, but has slowed considerably since earlier in the year, according to the Federal Reserve's popular Beige Book report released Wednesday. Reports from the 12 Fed districts on their local economies painted a picture of ""widespread signs of a deceleration."" Real estate remains a drag on economic growth in regions across the country, with major trouble spots identified in poor home sales and weak demand for commercial space.

The Mortgage Bankers Association (MBA) reported Wednesday that its index of home purchase applications jumped 6.3 percent for the week ending September 3, 2010, reaching its highest level since the end of May. Purchase activity, though, is still nearly 40 percent below what it was this time last year. Refinance applications, on the other hand, fell 3.1 percent as interest rates edged up slightly - their first drop in six weeks.

The delinquency rate for real estate loans held in commercial mortgage-backed securities (CMBS) accelerated in August after two successive months in which delinquency increases had moderated, according to Trepp LLC. Overall, the percentage of loans 30 or more days delinquent, in foreclosure, or REO, jumped 21 basis points last month, putting the overall delinquency rate at 8.92 percent. The analysts at Trepp say the August numbers ""may give ammunition to those who argue that the commercial real estate crisis is far from over.""

According to a report from the American Land Title Association (ALTA), title insurance premiums written during the second quarter of 2010 decreased 8.5 percent to an industry total of $2.3 billion. That's down from $2.5 billion in Q2 2009. The industry reported $4.4 billion in title insurance in the first half of 2010, a decline of 2.9 percent from the period a year prior. ALTA says the numbers reflect an on-going recession in the housing market with further downward pressure on home prices.

That ominous shadow inventory of distressed homes that's been hanging over the industry was trimmed in July, according to Barclays Capital. It marked the fifth straight month the company has recorded a decline in the shadow supply. Barclays says it shrank 1.2 percent, to 3.92 million homes. At the same time, the firm's assessment of the nation's REO inventory ticked up 0.2 percent to 538,000 properties. The distressed share of home sales rose sharply in July, and Barclays says this will likely drive prices down 2 percent over the next three months.

Just ahead of the Labor Day holiday, the federal government reported a slight, but notable improvement in the labor market. New numbers released Friday show that the economy added 67,000 jobs in the private sector during the month of August. Despite growth by private employers, the national unemployment rate edged up from 9.5 percent in July to 9.6 percent in August, as the government cut 114,000 Census jobs and some 550,000 Americans who had given up on finding work decided there were jobs to be had and returned to the hunt.