National Commercial Funding Insider

Source: CNN Money

The Fed poured $41 billion into the United States financial system to keep operations in the financial markets running smoothly. The infusion came after the Fed issued another interest rate cut, the second in just six weeks in response to the collapsing housing market. The Fed cut a 1/4 point from the federal funds that will now be at 4.50%. The Fed hopes that the 1/2 point cut in September along with this weeks 1/4 point cut will be enough of a cut to help the economy get through rough times in the near future due to the housing market decline and credit crunch.

Source: Pacific Business Journal (Honolulu)

Many experts in the commercial real estate sector are predicting slowing in 2008 that will correct the commercial market. The slowing has been called a “healthy correction”. Long-term investors will most likely not be affected by the slowing in 2008 but it will affect short-term investors and those who have over leveraged in the commercial market.

Source: St. Louis Business Journal

The Chief Economist for the Associated General Contractors of America, Ken Simonson, has looked at statistics from the United States Bureau of Labor and Statistics and says that construction jobs have been growing during the past year. Despite the housing market crumble, nonresidential construction jobs have increased by nearly 42,000 jobs this year according to statistics. The nonresidential construction sector is boosting the economy despite heavy losses and declines in the housing sector.

Source: Birmingham Business Journal

A recent survey conducted by Washington-based Guidant Financial Group revealed that among self-directed IRA holders real estate is still the #1 consideration for investment. The survey asked 1,000
IRA holders, all self directed investors and 65% indicated that they are considering real estate as the top sector to grow their fund. This comes as a surprise as the real estate market is in turmoil and decline and many are getting out.

The top real estate investments considered among respondents are:
- 60% rental properties
- 36% foreclosures and pre-foreclosures
- 28% raw land

Source: Bloomberg News

Four Fed Bank Presidents let investors know not to count on another Fed interest rate cut in October. Many have already criticized the Fed for the ½ point cut on September 18th as bailing out investors. Now Fed Bank Presidents are warning investors not to count on another decrease. The Federal Open Market Committee will meet again on October 30-31. Many traders are already indicating that they are planning on another rate cut next month by the Fed by another ¼ point.

Source: Bloomberg News

For the first rate cut since 2003 the Fed cut interest rates of the central bank to 4.75. The _ point cut was higher than expected. Although most speculated a cut of _ or _ point, the selection of the latter came as a surprise to many. Some criticized the cut as bailing out investors however most agree that an interest rate cut was necessary to help the declining housing and commercial markets.

Source: Tampa Bay Business Journal

Since the residential housing market peaked in 2005, current turmoil in the housing market has made the commercial market a little hazy. Many are holding on to land investments for a few years until the market increases in activity. Apartment land is still is demand and popular. Demand is lower now for large land developments since the slowing of the housing market, but some aspects of the commercial market are increasing in demand such as apartment land and some retail land space.

Source: Dallas Business Journal

Although a lot of attention is currently focused on decline in the housing market, credit market turmoil and slowing in the economy not all sectors are declining. Surveys from the Federal Reserve Bank in Dallas indicate that few outside of the housing market and lending market feel the pressures and volatility that the housing and credit market are facing. As the date the Fed will meet to discuss possible rate cuts approach many are predicting interest rates to be cut ¼ point and possibility a ½ point. Some housing developers have said that home loan terms are being changed mid deal because of the current unpredictability and instability.

SOURCE: “The Economist”

The question was recently posed in ‘The Economist”; does the Fed’s recent interest rate cut mean a looser monetary policy? For those who missed it, the Fed lowered the discount interest rates from 6.25% to 5.75%. The discount rate is the rate at which banks can borrow from the Fed if they ever get in a pinch or bind. Designed in a way to discourage banks from using it, it’s more of an emergency measure. Banks are discouraged from borrowing money from the Fed because it’s an indicator that the bank cannot find another bank to borrow from, a possible red flag for insolvency. The discount rate is a whole point higher than the rate banks can usually borrow from each other.

SOURCE: Buffalo Business First

A new program is being launched to encourage U.S. banks and commercial lenders to lend to businesses in Latin America. The U.S. Treasury Secretary Henry Paulson Jr. announced the program as a way to show support for neighboring countries and strengthen the region economically.

Latin American businesses suffer from difficulties in securing forms of financing and funding. Only 10% of businesses in Latin America currently have access to loans and funding through banks and commercial lenders. There are many businesses in Latin America that lack the collateral usually required to qualify for loans. Many of Latin America’s small businesses lack financial statements and collaterals that in the eyes of U.S. banks and commercial lenders makes lending to them a risky proposition.