Editor’s Note: The calls are getting louder with MSNBC taking about the impending collapse of the U.S. commercial real estate market. In the article they quoted that in 2006, 54% of the regional and local banks portfolios were made up of commercial loans compared to only 40% a decade before.
With values declining, many commercial loans coming due over the next 5 years and a much smaller appetite on investors behalf for this type of paper. The industry is going to have some serious troubles with these loans that were written at high valuations seen during the peak of the real estate bubble.
We will see if Congress is going to sit back and let this market implode on itself or will it come to the rescue again and provide financing to save these note-holders? My bet is “yes”
That big whoosh you’re hearing is the air rushing out of a commercial real estate bubble.
More than two years into the worst housing crisis in decades, commercial real estate is shaping up as the second half of what some are calling a “double bubble.” Owners of shopping malls, hotels, office space and apartment buildings — and the bankers who financed them — face a major crunch over the next two years as the mortgages on those properties start coming due.
Much like homeowners who now owe more on their mortgage than their house is worth, many commercial property owners have seen the value of their properties plummet, increasing the risk of default on hundreds of billions in commercial real estate loans.
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