Archive for January, 2011

Oklahoma’s Unemployment Drops in December

Wednesday, January 26th, 2011
Oklahoma was one of only 15 states in the Union to see its unemployment rate fall in December 2010.
New data from the U.S. Bureau of Labor Statistics confirms that Oklahoma’s unemployment rate dropped from 6.9% in November to 6.8% in December. A year ago (December 2009) the rate was also 6.8%.

The national unemployment rate stood at 9.4% for December.

Oklahoma now ranks in a tie with Kansas for 10th lowert unemployment in the country. Topping the list is North Dakota with 3.9% unemployment, followed by Nebraska with 4.4% and South Dakota with 4.6%.
According to the latest figures, 20 states experienced higher unemployment in December, while 15 states saw the rate remain unchanged.

Some Good News, for a Change

Sunday, January 23rd, 2011

Bob Bach is one of those rare economists who actually knows what he’s talking about.

Bob has been with Grubb & Ellis for, I think, forever, and the good news is he’s seen a cycle or two and understands how the commercial real estate industry works.

He also has a neat weekly blog called “Good News Friday” that is well worth reading. Here is his posting from last week:

Bob BachSome Fridays, it’s easier to write this column than others, and this is one of those Fridays. The New Year is getting underway with some economic momentum from December when Congress passed the $858 billion stimulus package (cleverly disguised as tax cuts) and better-than-expected holiday retail sales.

· The manufacturing sector has moved beyond the inventory correction cycle – the bounce when manufacturers, wholesalers and retailers all restock at the same time from very low, recession-induced levels. There is sustained growth thanks to exports, business investment and moderate increases in consumer spending. The new orders component of the ISM manufacturing index hit a robust 60.9 in December, well above the break-even level of 50. Manufacturers such as Parker Hannifin, Johnson Controls and Rockwell Collins have reported strong quarterly earnings.

· The beleaguered housing market ended last year on a hopeful note as existing home sales rose 12 percent in December to an annualized rate of 5.28 million, although foreclosures continue to weigh down prices.

· The Conference Board’s index of leading indicators rose a solid1 percent in December, the sixth consecutive monthly increase and a sign that economic momentum is building.
· Jobless claims continue trending lower in fits and starts, falling to 404,000 for the week ending January 15th. The indicator looks set to move below the elusive 400,000 mark – which it did during the week of December 25th – and continue lower from there.
· I’ve saved the best for last – the 146 percent increase in the volume of capital investing in commercial real estate last year, according to Real Capital Analytics. Forecasts at the beginning of 2010 were for increases in the range of 20 to 30 percent. The level remains historically low, but that means the market has ample room to rack up further gains this year, building on last year’s momentum.
Have a great weekend.
Best regards,
 Robert Bach
 SVP, Chief Economist
 Grubb & Ellis

“Life in the Mortgage Capital Markets”

Tuesday, January 11th, 2011

I received an interesting note from Richard Howell with Oklahoma City-based Holliday American Mortgage, and thought it a nice tee-up to what we can all expect in 2011:

It may well be a Happy New Year.  For the first time in a few years, there seems to be some life in the mortgage capital markets.

An active mortgage market means more money available to finance transactions and that, in turn, increases transaction activity.  While the market’s rebound seems weak, any activity looks strong when compared to last year’s numbers.  About $14 billion in new U.S. Commercial Mortgage Backed Securities were sold last year, which compares with about $2.7 billion in 2009.  That is a 500% increase from the 2009 but a fraction of the $231 billion sold in 2007.

While more CMBS money is becoming available our life insurance companies are seeking to fund more commercial real estate mortgages.  Total originations last year by life insurance companies will outpace 2009 by a large margin.  In fact the life insurance companies have doubled their percentage of the mortgage capital market by 100%, capturing 20% of the available market.

For comparison, life insurance companies provided about $43 billion in commercial mortgages in 2007 and about $27 billion in 2008 before volume fall off in 2009 when $16 billion in commercial mortgages were closed according to data from the American Council of Life Insures.  It is estimated that the 2010 volume will near $30 billion.

With commercial mortgages becoming more available, transaction activity has moved from being strictly apartments and trophy properties to good assets in secondary markets.

While two legs of the three legs of the commercial real estate finance stool are getting stronger, the largest leg continues to limp.  Banks continue to be burdened by problem loans.  However transaction activity is increasing assisting the banks in their evaluation of these assets allowing the stronger banks clean up their balance sheets.

Increased activity has also made loan pricing clearer today which implies that the market is becoming more efficient.  Commercial real estate mortgage interest rate spreads over Treasuries are tightening.  Spreads, the risk premium over a government security are determined by the quality of the asset and loan characteristics.

As we begin 2011 we are all concerned that when the government stops its quantitative easing, interest rates will raise.  We believe that 2011 may one of the best times in recent memory to lock in attractive long term fixed rate financing. 


Richard Howell

Holliday American Mortgage

6501 N Broadway Suite 250, Oklahoma City, OK 73116

Work 405.302.0652; Cell 405.833.5753