Tuesday, September 1, 2009

Commercial Real Estate is a Ticking Time Bomb

Yesterday I wrote about a looming crisis in the commercial-mortgage-backed securities market. But there’s another time bomb ticking away in the commercial sector: U.S. banks are holding more than $1 trillion of mortgages backed by commercial property that is fast losing value.

According to analysts at Deutsche Bank AG, as property value declines and scarce credit continue to drive commercial property developers and investors into default, total lifetime losses on banks’ $1 trillion “core” commercial-mortgage holdings, or those backed by income-producing properties, would reach between 11.6% and 15.3%, or $115 billion and $150 billion. Those expected losses would be at least as large as those on loans originated and bundled into commercial-mortgage-backed securities, or CMBS, from 2005 and 2008, a period of cheap and reckless credit, the analysts estimate.

Click here to read more.

1 comment:

  1. I hate commercial real estate because my mom used to work in this field and the building fell on her head. I also hate personal finance class, but I think that my teacher is really hot for an ugly guy.