Federal Reserve Focusing on Commercial Real-Estate Recession as FOMC Meets
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.
Federal Reserve: Commercial Paper Outstanding Rises By $10.7 Billion This Week
Dow Jones, New York - The U.S. commercial paper market increased this week, reversing course after several weeks of declines, according to data released by the Federal Reserve Board on Thursday. This week, the outstanding level went up by $10.7 billion, after a decline of $27.6 billion last week.
The asset-backed portion of this short-term market did fall, though, by $3 billion. Last week, this part of the market grew by $900 million on a seasonally adjusted basis, after shrinking by $4.6 billion in the prior week.
Federal Reserve says commercial real estate may pose risk for U.S. economy
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.
Fed’s Lockhart is concerned about the U.S. Commercial Real Estate market
Good to see our officials talking about this now. That will be the next major story along with the fallout in the retail commercial property market. With that we have seen to this point, we should assume we will see some sort of bailout program to refinance these distressed properties.
News:
U.S. commercial real estate problems could derail the country’s economic recovery later this year, a top Federal Reserve official said on Monday. “Many banks are pretty heavily exposed to commercial real estate. It is also a big part of the securitization market. So commercial real estate is one that concerns me,” said Federal Reserve Bank of Atlanta President Dennis Lockhart.