Unemployment is now 9.5%, pushing commercial vacancy rates to 17%. The Globe and Mail reports real estate experts and regulators warned a U.S. congressional committee that commercial real estate is headed for a crash that could eclipse the slump of the early 1990s, saddling already hobbled banks with a new wave of bad loans.
Big Debts Due
The commercial real state crisis is not only important for banks, which hold almost $2-trillion of commercial loans. The commercial real estate industry also provides more than 9 million jobs and generates roughly 70 cents out of every dollar in local government budgets. The Obama administration has a $1-trillion Term Asset-Backed Securities Loan Facility (TALF) program in place.
Because there is no secondary market for commercial mortgages, TALF will inject big dollars into a non existent market to provide liquidity and encourage lenders and investors to participate in commercial real estate loans. TALF is expected to help unfreeze credit markets that limited refinancing billions in commercial real estate debt that resulted in a wave of defaults. At the core, this is a crisis caused by a credit collapse.
Howard Bell PFP CCRM is the founder/editor of Your Property Path.com, featuring over 450 articles on property management, Your Property Path SF, trade talk for the San Francisco real estate industry, Your Property Path News Brief, snap news updates and real estate market info, and Your Property Path Amazon Store. Howard is a property manager in San Francisco and holds a certification in financial planning.
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