Thursday, March 26, 2009

Commercial Property Faces Crisis - Delinquency Rate at 1.8%, Near Peak of Last Recession

Back on February 12, 2009, I posted a message entitled "Commercial Mortgage Back Securities (CMBS). In that posting, I stated the following: "The time has come for the commercial real estate market to be exposed for the excesses over the past five years. CMBS will be the CDS (Credit Default Swaps) and Sub-prime Mortgages of 2008. Approximately $380 billion in commercial real estate are up for renewal/refinance/payoff during 2009. Financial institutions are holding over $1.2 trillion in commercial real estate. And unfortunately, we are just now hitting our stride in terms of the inevitable down cycle of commercial real estate."

Guess what? The "Wall Street Journal" reports today that, "Commercial real-estate loans are going sour at an accelerating pace, threatening to cause tens of billions of dollars in losses to banks already hurt by the housing downturn."

According to the article, Foresight Analytics in Oakland, Calif., estimates the U.S. banking sector could suffer as much as $250 billion in commercial real-estate losses in this downturn. The research firm projects that more than 700 banks could fail as a result of their exposure to commercial real estate.

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