June 06, 2023
The commercial real estate market is ready to pop - and with it the U.S. economy.
According to the Daily Caller:[/lin
About $1.5 trillion in commercial real estate mortgages will come due over the next two years, spelling a major risk to the $20 trillion commercial real estate market ahead of the next presidential election, according to Politico.
Remember the commercial leases cannot simply be terminated. Now many businesses have been stuck paying them, but when those leases expire they will be gone. And with so much commerce being done online now many of those commercial properties will be permanently vacant.
This will start a chain reaction of bankruptcies among commercial developers and landlords. Which in turn will lead to defaults on loans.
Anybody in the know in real estate is aware of the looming menace of a commercial real estate crack-up.
On top of rising interest rates, commercial buildings have also faced a fall in value due to remote work-related office vacancies, according to the Federal Reserve’s May report.
"Right now, we have the double whammy of much higher interest rates and the commercial real estate market going through a shock post-covid,” Democratic Virginia Sen. Mark Warner told Politico. "So I don’t think we can presume that… we’re going to be able to simply glide through [without a crash]. I’m still trying to sort through some of the policy options. … I have encouraged the White House, though, that we need to do some more intervention on these regional banks right away.”
Commercial real estate holders could experience credit loss due to "the magnitude of a correction in property values,” which "could lead to credit losses by holders of CRE debt,” according to the Federal Reserve.
Just one more nail in the coffin of the American economy.
Posted by: Timothy Birdnow at
10:56 AM
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