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It is apparent that the credit crisis is progressively affecting more and more people and industries as we go further into recession. The lack of regulation over the last few years in sub prime loans and mortgages has established a culture where it is acceptable for lenders to sell loans to parties who have a high chance of default. Our country is now facing the repercussions for these lenders’ unethical actions. Selling loans to unqualified parties has resulted in a significant number of foreclosures and shorts sales in the last year. This hurts banks, as the foreclosure process can be very lengthy and troublesome. Often times the balance that is received via auction for a property is significantly less than the total value of the loan, so it will be a loss for the bank. In turn, banks and lenders are now being much more risk adverse with the loans that they sell. It has been highly publicized that everyone from small businesses who are having difficulty paying their bills and basic operating costs to the consumer who can’t get a loan to buy a car have all been affected by the reluctance of banks to sell loans with any risk.

I work in the commercial real estate industry and haven’t really seen a large impact of the credit crisis on the industry, until now. Many in the commercial real estate community felt that real estate investors who are involved in substantial deals would be in a bubble away from the crisis, as many are reputable creditors who typically don’t have difficulty in obtaining financing. This is definitely not the case, as when looking at the market from transactional viewpoint, the number of commercial properties selling nationwide has significantly slowed. It was reported in the Rocky Mountain news today, that experts predict 44% less commercial properties selling this year. For the properties that are closing, it is becoming commonplace to see the sale being executed through foreclosure, short sale, and distress. A clear sign of this was a 50 plus property portfolio that was sold in distress to Hines earlier this week. It is not normal to see a portfolio of such a substantial number of properties close in distress. The properties that are closing with financing are closing with higher down payments and smaller loans, which is reflection that banks are becoming more risk averse.

Many brokerage companies within the industry have been affected by the crisis. Because brokerage companies are so reliant upon the number of transactions that they do, their business has been impacted by the lack of commercial properties selling due to the difficulty of obtaining financing as of late. In the news over the last couple months, it was reported that CB Richard Ellis and Cushman & Wakefield, two of the largest firms in the country, are going through restructuring and layoffs as a result of slowing business. CB Richard Ellis who a year and a half ago had stock prices in the high 30’s is now trading for 4 dollars. The credit crisis has obviously caused significant struggle for many individuals, small businesses and the commercial real estate industry. It is really a shame that society did not have more oversight on the lenders’ unethical practices; because if we did it is my opinion that we curbed these practices and be in better shape than we are today.