The worry that commercial real estate was the "next shoe to drop" goes back a long time, but after this additional data point, I think we're here. How banks and other financial institutions are hiding this level of damage has me scratching my head. Calculated Risk with the details:
From Dow Jones: Moody's: Commercial Real-Estate Prices Fall 7.6% In May
Commercial real-estate prices fell 7.6% in May ... The indexes are down 29% from a year ago and 35% from their October 2007 peak.According to Moody's, CRE prices fell in 8.6% in April (about 16% in two months).
Talk about cliff diving!
Source: MIT
I am pretty sure that the commercial RE bust is "contained" or something. You sure this is a big deal?
ReplyDeletesomeone tried to get me to back their loans the other day - a commercial property owner. They couldn't get enough leverage from the bank.
ReplyDeleteProperty prices might hold if the rents dont drop. But i'm seeing alot of lease space comming onto the market.
If you have longterm leases the yield should be some protection. Overall I dont see how prices can go up when the banks are reducing the gearing ratios. Clearly the prices will come off but how much? how long is a piece of string?
Property trust shares do look very cheap at the moment.
Your post subsequent to this one, re: the $23.7T figure from the sigtarp report, and this one -- how banks can hide these losses -- are, I think, connected.
ReplyDeleteCall me a doomer.