Editor’s Note: Looks like the prediction is correct and U.S. lawmakers are inquiring and most likely drafting up programs to assist with the decline commercial property market. When residential real estate prices where declining rapidly in 2007, I knew the next shoe to drop would be the commercial market.
With all the securities that were created and sold during that time, money was cheap and we witness major construction and renovations in the U.S. happened at a pace that was not sustainable for the long term. Not sure about you, but in Seattle, we are seeing many “for lease” signs on commercial spaces. Most of these projects were underwritten during the bubble so their income projections were very generous to say the least. We will be following this story closely to get the details out as soon as they are made available or we find them first.
News (Bloomberg):
Federal Reserve Chairman Ben S. Bernanke said a potential wave of defaults in commercial real estate may present a “difficult” challenge for the economy, without committing to additional steps to aid the market.
Bernanke, testifying before the Senate Banking Committee today, urged lenders to modify “problem” mortgages to avert defaults. Christopher Dodd, the Connecticut Democrat who chairs the panel, told Bernanke that “some have suggested” the commercial market “may even dwarf the residential mortgage problems” in the U.S.
The state of commercial real estate was one of the most- asked-about subjects in questioning by lawmakers so far in Bernanke’s two days of testimony on the economy. Bernanke said today in the Senate and yesterday at the House Financial Services Committee that it’s too early to tell how effective the Fed’s main initiative in the area will be.
The Term Asset-Backed Securities Loan Facility, a Fed emergency program that lends to investors to purchase securities backed by consumer and business loans, began accepting commercial mortgage-backed securities as collateral last month.
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