The Approaching Commercial Real Estate Apocalypse In The USA

Two articles earlier today caught my eye… In their 22nd February 2010 article ‘Banks Continue To Pull The Rug Out From Under The Economy’ Joe Weisenthal and Kamelia Angelova ask: “Can the economy revive if banks don’t start to lend again?

Today the St. Louis Fed released its latest monthly look at commercial and industrial loans at major banks — a measure that some would say represents the essence of the US banking system.

As you can see, this measure is still falling like a knife – a bad sign for the ongoing health of the economy. (And also not what we were promised when we bailed out the banks.)”

In the Commercial Real Estate Apocalypse in 2011-2012 “inquiring minds are digging deep into a 190 page PDF by the Congressional Oversight Panel regarding Commercial Real Estate Losses and the Risk to Financial Stability.”

In the Executive Summary you’ll find that: “Between 2010 and 2014, about $1.4 trillion in commercial real estate loans will reach the end of their terms.

Nearly half are at present “underwater” — that is, the borrower owes more than the underlying property is currently worth. Commercial property values have fallen more than 40 percent since the beginning of 2007. Increased vacancy rates, which now range from eight percent for multifamily housing to 18 percent for office buildings, and falling rents, which have declined 40 percent for office space and 33 percent for retail space, have exerted a powerful downward pressure on the value of commercial properties.”

“A significant wave of commercial mortgage defaults would trigger economic damage that could touch the lives of nearly every American. Empty office complexes, hotels, and retail stores could lead directly to lost jobs. Foreclosures on apartment complexes could push families out of their residences, even if they had never missed a rent payment.”

“At 190 pages, that was a very detailed report. One key take away is the huge numbers of banks at risk of failure… There are 358 banks in the size of $1 to $10 billion with excessive CRE concentrations. There are an additional 2,115 banks in the size of $100 million to $1 billion with excessive CRE concentrations.”

What’s The Bottom Line?

I would encourage you to read the articles mentioned above because you’ll quickly come to the same conclusion which is that it’s going to get very much worse in the USA before it gets better….

Information compiled by Scott Oliver, author of 1. Costa Rica Real Estate Scams & How To Avoid Them, 2. How To Buy Costa Rica Real Estate Without Losing Your Camisa, and 3. Costa Rica’s Guide To Making Money Offshore.

Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.