And Now For The Commercial Real Estate Bubble

Remember this back on 4.24.09:

The Commercial Real Estate Bubble…Coming To A Bank Near You

I know you folks are very savvy, paying attention, and doing math with a real pencil instead of a red crayon, so what comes next is NO SURPRISE to you.  Are we all ready for the next part of the rollercoaster ride when the commercial real estate bubble implodes? If you still have money in the stock market, why is that? (Once again, bold emphasis is mine, and may I repeat how screwed we are?)

Well today, 7.9.09, we have this:

Commercial real estate woes grow

WASHINGTON — Owners of shopping malls, hotels and offices are defaulting on their loans at an alarming rate, and the commercial real estate market is not expected to hit bottom for three more years, industry experts warned Thursday.

“The commercial real estate time bomb is ticking,” said Rep. Carolyn Mallory, D-N.Y., who heads the congressional Joint Economic Committee.

Delinquency rates on commercial loans have doubled in the past year to 7 percent as more companies downsize and retailers close their doors, according to the Federal Reserve. Small and regional banks face the greatest risk of severe losses from commercial real estate loans.

The commercial real estate market’s fortunes are tied closely to the economy, especially unemployment, which hit 9.5 percent in June. As people lose their jobs, or have their hours reduced, they cut back on spending, which hurts retailers, and take fewer trips, which hits hotels.

Funding for commercial loans virtually shut down last year as the financial system unraveled. Industry executives say financing is still extremely difficult to obtain, even for financially healthy properties.

While that may seem like an abstract problem, it has real-world consequences. New construction projects have come to a virtual standstill. That means reduced tax revenue for local governments and fewer construction jobs, said Jeffrey DeBoer, chief executive of the Real Estate Roundtable, an industry group.

The commercial property industry is “not going to turn around until consumers and businesses start spending money again,” he said.

Total losses in securities backed by commercial property loans could be as high as $90 billion in the coming years, according to Deutsche Bank analyst Richard Parkus. He says even more losses — up to $140 billion — are expected from construction loans made by regional and local banks, rather than those sold as securities held by investors.

“We believe the bottom is several years away,” Parkus told lawmakers.

Are you ready folks? Still have money in the stock market?

By Logistics Monster


  • I’ve gotta tell you I may never trust my money to the stock marketeers again. A liberal friend of mine, (not a leftist just a lib) made a comment the other day. The comment sounded like a talking point from the Ed Shultz show but he said, “Don’t you see what the free market capitalists have done to this country?” I about blew a gasket. I told him we have not seen a free market since 1932 for one, secondly ponzi scheme thieves or thieves in general are not exclusive to capitalism and perhaps more prevalent in communist/socialist environments (oil for food anyone). I also told him that giving loans to people that can not afford to pay them or based upon ethnic status is a primary contradiction to capitalism, and this was the fuse to the bomb that has been going off in America. Lastly the stock market investments over the past decades have been falsified by government interference. By offering tax deferrals and such on IRAs, money poured into the stock market as a retirement shelter (LOL…C[ry]OL). So instead of people using their money to invest in Joe’s Grocery down the street or growing g their own business or paying their house/car/boat/TV set off, they sent there money off to a tax sheltered IRA at the urges of the government. Free market???? Capitalisim??? I scoff; we have never seen such a thing. Nope…they will not see my money again. I am going to keep it were I can see it.

    Oh, I forgot to mention the FED. Ummmmm can you say market interference? But I don’t even understand the FED. It is a complicated conglomerated shadow world of closed door manipulation as far as I can tell. Such an entity does not belong in true free market capitalism. What a farce! We have tried this communism crap long enough…lets go to the laissez faire, with money backed by something other than the word of a tyrant.

  • Practical Madman -

    Things are going according to plan.

    I have been self employed for 18 years, but I have recently fallen behind on a credit card payment because of the lack of work. No one seems to be spending money doing remodeling, and no new businesses are opening up to need signs (it is a shame that a talented person with TWO streams of income can not make any money!). I got a call today regarding this credit card, and the lady had a distinct accent. I interrupted her little prewritten spiel and asked her what country she was calling from. She sounded a little taken back, but timidly answered “India”. I lost it and told her to tell the credit card company that I will not be able to make any more payments because they shipped all of the jobs from here to foreign countries. If they want Americans to pay their bills, they have to EMPLOY Americans for jobs in AMERICAN companies!

    This is all according to PLANS written out long ago by the banksters. Move all of the industry and jobs out of the country, de-industrialize the nation, get them into debt, then lower the boom! All is going according to plan and we can expect the follow through VERY SOON!!!!!

    When life gives you lemons, make lemonade. Besides being a freelance carpenter, I make hand carved wood signs and I have been going to an artists’ market on Saturdays to try to get some sales, and to get some attention (and advertising my carpentry services also). I set up a table with several signs and my photo album. Some of the signs I have out are designed to get people thinking and to spark conversation. Some of the signs are; “THINK “it’s not illegal…yet”; “First they ignore you, then they ridicule you, then they fight you, then you win”; “GUN CONTROL- hitting the target”; Evil can only survive if good men do nothing”; “There are none so hopelessly enslaved than those that falsely believe they are free”; “99% of lawyers give the rest a bad name”; “We are born wet, naked, and hungry…then it gets worse”; and my favorite- “I RANT- therefore I am”. These get people to stop and gets many a conversation going. I get at least one person a week to open their eyes, which is my main goal, since there seems to be no one with money. I haven’t sold enough signs (actually I only sold ONE in 6 weeks) yet to cover what I am spending on the booth ($15 a weekend), but to me it is worth it. A lot of people have carpentry work they need done, but all take my card and say “I’ll call you when I can afford it”.

    This post of the commercial market woes just set me off, and I am sorry about the rant (therefore I am), but things are going from bad to worse and we all need to do everything we can to wake as many as possible up. Thank you DT for all that you do!

  • PM,

    You are right – this is all going according to plan, following a script that’s been written for a hundred years. Your signs sound great – sorry no one can afford them. The good news is that you have a skill that can be traded for food when the going gets really rough.

  • Leaping Spark -

    From the most auspicious of starts comes some of the most terrific futures. Who would have know that from a law suit filed in Chicago in 1992 by a young lawyer named Barack Obama to force mortgage and loan companies to make loans to people who could not afford them, would come the current reale estate crash. It’s just amazing how the POS Obonzo’s name keeps coming up then and now.

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