Pushing Dirt

Transparent Real Estate predicts a huge wave of refinancing in 2009 as as sell-off in Treasuries begins and those rates climb. Sorry mortgage brokers, I just don’t see it. Certainly things will improve from their current ugly depths, but many property owners — commercial and residential alike — just can’t refinance their current mortgage. Their property’s value has fallen so much (often 20 to 30 percent or more) that it just won’t “appraise out” any longer.

Homowners with 30-year fixed rate mortgages won’t need to worry. Homeowners with adjustable rate mortgages can start worrying now. So can commercial mortgage borrowers - their loan terms often are as short as three to five years, and many commercial mortgages will come due in 2009 with no new debt available to replace it. Some lenders will extend these loans, desiring to buy themselves and their borrowers some time to resolve the dilemma. Others will foreclose.

My feeling is that while we may see a “bottom,” property values are not going to get measurable better in the next 24 months. Neither are the floodgates of commercial financing going to re-open to the point where we are going to see 80% financing on investment commercial real estate anytime soon.

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I would never select one through any manner other than a referral. It’s too big a task to be carried out by someone you’ve found in the yellow pages, a google or yahoo search, or by responding to mass mailer. Whether it be residential or commercial. Ask a friend.