Monday, January 31, 2011

The SBA and hecatomb


(HEK-uh-toom, -tom)

A large-scale slaughter.

Originally a hecatomb was a public sacrifice and feast of 100 oxen or cattle to the gods in ancient Greece and Rome. The word is derived from Latin hekatombe, from Greek hekatombe, from hekaton (hundred) + bous (ox).
The hecatomb in commercial real estate is over.

The Moody’s/REAL All Property Type Aggregate Index recorded a 0.6% increase in November, the third consecutive month of national price gains.

This index measures overall commercial property values on a monthly basis. The changes are based on repeat sales transactions.

The National – All Property Type Aggregate Index has increased 6.4% during the past three months. These three months of rising prices contrast with the prior three months in which prices measured significant declines. Prices are up 2.8% from a year ago, down 31.6% from two years ago and are 41.6% below the peak, which occurred in October 2007.

If you would like a copy of Moody’s January 2011 report on commercial real estate, let me know.

Either a SBA 504 loan or a SBA 7(a) loan can finance commercial real estate.
SBA LIBOR Base Rate January 2011 = 3.26%
SBA Fixed Base Rate January 2011 = 6.06%
504 Debenture Rate for January
The debenture rate is 3.89% but note rate is 3.951% and effective yield is only 5.951%.

Will there be a hecatomb for borrowers with variable rate loans?

The economy is improving. It accelerated in the fourth quarter of 2010 as consumer spending climbed by the most in more than four years.

Gross domestic product grew at a 3.2 percent annual rate. For all of 2010, the world’s largest economy expanded 2.9 percent, the most in five years, after shrinking 2.6 percent in 2009. The volume of all goods and services produced rose to $13.38 trillion, for the first time surpassing the pre-recession peak reached in the fourth quarter of 2007.
Household purchases, about 70 percent of the economy, rose at a 4.4 percent pace last quarter, the most since the first three months of 2006. The increase added 3 percentage points to growth.

Rates have to start going up, right?

Fed policy makers indicated last week that growth isn’t strong enough to reduce the jobless rate as fast as they would like.

Keep your eye on Friday’s payroll report from the Department of Labor.
Here is a summary of net monthly payroll employment and this week’s interesting little table of data:
December 103,000
November 71,000
October 210,000
September (41,000)
August (1,000)
July (66,000)
June (175,000)
May 431,000
April 218,000
March 230,000
February (36,000)
January (26,000)
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)

What does all this mean?

I don’t know.

For all of 2010, about 1.1 million jobs were created, the most since 2006.

That’s a start, but we’ve got a long ways to go.

There are still over 7 million fewer jobs in the U.S. compared to the peak of employment in 2007.

If the U.S. economy adds 200,000 jobs per month, it will take 3 years to get back to the previous peak. And that doesn't include jobs needed to offset population growth (about 125,000 jobs per month).

The Federal Open Market Committee last week said that “economic conditions…..are likely to warrant exceptionally low levels for the federal funds rate for an extended period.”

Until employment really picks up, rates will remain low.

No one is predicting a hecatomb in the Super Bowl.

The Green Bay Packers are only 2 ½ point favorites over the Pittsburgh Steelers.

This is the narrowest point spread in 27 years.

The last Super Bowl to have a point spread of less than three points was played after the 1983 season, when the Washington Redskins were 2 1/2-point favorites over the Raiders.

Of course the Raiders went on to win that game 38 – 9.

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