Commentary from Rob Chrisman:

A copy of the first issue of Superman comics was sold for one million dollars. The copy originally sold for ten cents in 1938. Someone said that if that same dime had been invested in General Motors stock in 1938, it would be worth at least a quarter.

As I tell groups whenever I speak, you can’t drive through a downtown anywhere in the United States without seeing “For Rent,” “For Sale,” “For Lease” signs, or plain empty storefronts. It turns out that the default rate for commercial property mortgages held by U.S. banks more than doubled in the fourth quarter and may peak at 5.4 percent at the end of 2011, according to a study by Real Capital Analytics Inc. The default rate for loans on office, retail, hotel and industrial properties jumped to 3.8 percent from 1.6 percent a year earlier. The default rate for loans on apartment buildings rose to 4.4 percent from 1.8 percent. Commercial property values, which fell 29% in December from a year earlier, are down 41% from the October 2007 peak, according to the Moody’s/REAL Commercial Property Price Index. Unfortunately for banks here in the US with between $100 million and $1 billion in assets, they hold 25 percent of commercial property loans outstanding and 15 percent of apartment loans. The biggest banks, those with more than $10 billion in assets, hold about half of commercial loans and two-thirds of apartment loans.

Freddie Mac said yesterday that it lost $7.8 billion in the fourth quarter, or $26 for every man, woman, and infant in the United States. On the plus side, it was better than the $23.9 billion Freddie lost in the same quarter a year ago, and apparently doesn’t need more money (for now) than the $51 billion in taxpayer aid it already received. For all of 2009 the company lost $21.6 billion versus 2008’s loss of $50.1 billion. But Freddie Mac’s chief executive, Charles Haldeman, warned of a “potential large wave of foreclosures” still to come

Yesterday’s $42 billion 5-yr auction did not go well. It goes back to the “What if we held an auction and nobody bid?” Indirect bids, which in the past indicated a level of interest from foreign entities but in the last year became a little convoluted, have been on a roller coaster: Tuesday’s 2-yr hit over 53% of the auction while yesterday’s was the lowest since July at 40%. Not good. The Bernanke testimony (rates need to remain low), along with the much worse-than-expected New Homes Sales data, muddled the picture somewhat for investors yesterday. The good news for mortgage folks is that dealers are reporting heavy selling, and selling is often powered by locks, so current locks must be picking up.

The New Home Sales data was particularly bad. In January sales dropped 11%, the worst on record and erasing all the gains from last year. Nationwide, inventory represents over a 9 month supply – the highest in almost a year. And year-over-year the median price for a new home fell in January by 2.4%, to $203,500 from $208,600 a year ago. Regionally, January new-home sales dropped 35.1% in the Northeast, 11.9% in the West, and 9.5% in the South. Sales rose 2.1% in the Midwest.

And although Mr. Bernanke said the economy still needs the Fed’s support via low rates, he said the central bank is prepared to tighten credit when the time comes to prevent inflation. A first step toward tighter credit could involve the Fed draining the more than $1.0 trillion in excess reserves banks have accumulated after the central bank bought mortgage-backed securities and U.S. Treasury securities to combat the financial crisis, most likely through reverse repurchase agreements.

This morning the markets are being pushed around by Jobless Claims, the GDP, a $32 billion 7-yr note auction, and continued testimony from Ben Bernanke. Prior to the 8:30AM EST numbers the yield on the 10-yr was back down to 3.66%. Durable Goods were up 3% for January versus December’s +1.9%. (Ex-transportation the number was -.6%.) Jobless Claims showed an increase of 22,000 to 496,000, with a four-week moving average creeping up by 6,000 to 473,750. Immediately after the news the yield on the 10-yr dropped to 3.64%, and mortgage prices are better between .125 and .250, depending on coupon.

On today’s date: February 25…

1948: Communists seize Czechoslovakia     

1933: 1st genuine aircraft carrier christened, USS Ranger     

1926: Francisco Franco becomes General of Spain             

1910: Dali Lama flees Tibet from Chinese troop to British-Indies

1793: 1st cabinet meeting at George Washington’s home

The last word:

“Always remember that the future comes one day at a time.” – Dean Acheson