Federal Reserve Focusing on Commercial Real-Estate Recession as FOMC Meets

by LJ Miehe on August 10, 2009

Editor’s Note: Ben Bernanke’s assessment is spot, we can not call it a recovery if we have commercial real estate tanking as well.  Not to mention the Prime and Alt-A home mortgages that having rising default levels.  According to the Bloomberg piece, commercial property values have fallen 35% since Oct. 2007.  In the article it states $165 billion in commercial loans will be coming up for refinancing.  This is the next shoe to drop.

News (Bloomberg):

The collapse in commercial real estate is preventing Federal Reserve Chairman Ben S. Bernanke from declaring the economy and financial markets are healed.

Property values have fallen 35 percent since October 2007, according to Moody’s Investors Service. That’s making it tough for owners to refinance almost $165 billion of mortgages for skyscrapers, shopping malls and hotels this year, pressuring companies such as Maguire Properties Inc., the largest office landlord in downtown Los Angeles, to put buildings up for sale.

The industry is likely to be high on the agenda when Bernanke and his colleagues sit down in Washington tomorrow for the Federal Open Market Committee meeting on monetary policy. Lawmakers including Barney Frank and Carolyn Maloney are pushing the central bank to extend an aid program designed to restore the flow of credit.

If nonresidential real estate remains in the doldrums, the Fed may be forced to leave emergency-lending programs in place and keep its benchmark interest rate close to zero for longer than some investors expect, given positive signs elsewhere in the economy.

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