According to a bloomberg article written by David M. Levitt based on a study by Real Capital Analytics Inc., $108 billion worth of commercial real estate is now in default, bankruptcy, or foreclosure.
The report cites that at the end of June there were over 5,300 properties in distress. This is more than twice the number identified at the end of 2008. According to a report put out by the AP, banks held approximately $1.8 trillion in commercial real estate loans. Jon D. Greenlee, the Federal Reserve's associate director for banking supervision and regulation, said that 7 percent of those loans were considered delinquent, almost twice the rate of a year earlier.
CNBC's Diana Olick is reporting that Richard Parkus of Deutsche Bank noted that commercial values have dropped 35-45% across the country and that this decline will complicate refinances moving forward. Does that sound familiar to the residential market?
The common denominator is that both residential and commercial real estate markets are suffering from asset declines which in turn is applying significant pressure to bank's balance sheets which is resulting in a deterioration of the credit markets. The deterioration of the credit markets then feeds back to the broader economy.
Contrary to Jim Cramer, the declines in real estate values are ongoing. The further asset values fall, the larger this economic and banking crisis becomes, Mr. Obama.
Comments (3)Subscribe to CommentsComment