The outlook for commercial real estate will be impacted by the performance of single-family housing, which is the largest drag on economic growth, according to Douglas Duncan, the Mortgage Bankers Association's chief economist. Delivering an economic outlook at the MBA's commercial real estate finance convention in Orlando, Mr. Duncan noted that there is a huge supply of inventory that has to be worked off for the single-family housing market to stabilize and he expects this to happen in the third quarter. If anything, "the risks are to the downside," with this process taking even longer. Only 5% of homeowners are having serious difficulties with their mortgage loan payments (a little over 6% of homeowners have subprime ARMs), and the credit crunch of last year was not so much a subprime issue as a leverage issue, according to him. The B&C loans found their way into different securitizations and collateralized debt obligations and this was what caused the problem. At another MBA panel session on the paradigm shift in the capital markets, panelists agreed that CDOs will not be back very soon, and when they do they will be in a simpler format and likely have more equity participation.

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