The commercial real estate timebomb

Site Notices

[ARCHIVED THREAD] - The commercial real estate timebomb (Page 1 of 2)

Posted: 6/11/2009 6:45:06 PM EDT

I had a talk with my cousin tonight who is in commercial real estate lending. He told me that troubles lie ahead in this area. He said that these same mortgage backed securities were sold in the commercial area as well, and that he has seen a report saying that 800 billion will come due this fall, 900 billion the following year, and 2 trillion the year after that. He said nobody will be able to meet the refinancing requirements, and that this is going to be bigger than the residential real estate problem.
I don't know as much about commercial lending, and he told me so many things that I forgot half of what he said, but I did get the impression that its going to get alot uglier. With this in mind, it really doesn't matter what the Dow does now, because it is only temporary at best. All positive signs that the media wants you to believe in is nothing more than a head fake. The media wants you to believe that the Messiah has fixed the problem, now just go spend money again. This ship is sinking. NBC/CBS/ABC/CNN/MSNBC is telling us all will be fine, while those of us who know better are already putting on lifejackets.

Posted: 6/11/2009 7:02:01 PM EDT

[#1]

Forewarned is forearmed

Posted: 6/11/2009 7:05:02 PM EDT

[#2]

More pain on the horizon, much more.

Posted: 6/11/2009 7:08:22 PM EDT

[#3]

well I work in Charlotte NC. My company warehouse is in an industrial park that has 12, 10 to 15000 sq ft warehouses in it. 3 are rented out. huge office space across from us completely empty. went down a road the other day that had tons of empty buisnesses. This was the hot spot of the country not long ago. You're right, this is gonna be ugly

Posted: 6/11/2009 7:51:35 PM EDT

[#4]

I'm going to get me on HELL of a shop

Posted: 6/11/2009 8:49:56 PM EDT

[#5]

Quoted:
I'm going to get me on HELL of a shop

unless you pay cash, nobody will finance you or you will be paying 20% interest on the loan.

with 775 credit score.

Posted: 6/12/2009 3:45:33 AM EDT

[#6]

You can run some searches for threads about commercial real estate issues.

It has been said in a few threads before but I am not sure many people are really paying attention to it at all.

If the value drops enough to where property taxes are possable I could see getting a commercial brick building and setting part of it up to live in and part of it to store preps and vehicle. Then again you have to watch zoning games with this stuff.

There are a lot of empty commercial buildings around here, always have been for some reason.

None of them are reasonable on property taxes in my opinion.

Just because I can afford the purchase price does not mean I want to keep on dealing with silly high property taxes.

And I am not sure some of the homes being bought for super low prices are being taxed at that low price. And even if they are taxed at that low price, how long will it stay that low.

I am mostly concerned taxes are going to go through the roof before long.

Posted: 6/12/2009 3:48:09 AM EDT

[#7]

I see that coming. I'm in Commercial HVAC . Typically when the economy dips we see a good volume of work when companies downsize ie: go from 20,000 Sq ft to say 15,000 . We have seen some of that work but the trend we are seeing is companies just walking away from their lease. It's not just my observation but statements from my customers (property managers and owners) . I'm all over Central Fl and beyond and take note on all the empty stand alone storefronts , warehouses etc... no doubt that a very large shoe will be dropping on commercial real estate. The ramifications ? who knows, but it's not good!

Posted: 6/12/2009 4:32:12 AM EDT

[#8]

The OP's cousin is talking about this: Bondholders Face Commercial Mortgage Losses as Principal Is Due

Posted: 6/12/2009 5:50:25 AM EDT

[#9]

My work is tied directly to commercial lending, and I can tell you, it's bad. The commercial lending market is still locked up tight, with no signs of recovery. I'm amazed it's held together this long.

Also, foreclosures spiked at the beginning of this. Now, they have almost stopped, and the ones that do filter through are all very low-dollar deals. They are clearly not realizing their losses. Those losses WILL be realized, eventually, and when they are... well, everyone will act surprised anyway.

The ALT-A loans in the residential market are also another huge, unrealized problem on the horizon.

Cracks are forming, and people are beginning to notice.

The emperor has no clothes.

Posted: 6/12/2009 6:44:43 AM EDT

[#10]

There's a lot of empty buildings in northern VA right now, and the economy is good here compared to the rest of the country. I'm sure this will be much worse than the residential sub-prime defaults, and the government isn't going to be able to borrow their way out of this one without raising interest rates a lot. They recent treasury auctions and comments from China are proof that their credit line is almost gone.

The question is what should you be invested in? This could go either towards hyper inflation or deflation depending on what the government does.

Posted: 6/12/2009 7:14:21 AM EDT

[#11]

Quoted:
I had a talk with my cousin tonight who is in commercial real estate lending. He told me that troubles lie ahead in this area. He said that these same mortgage backed securities were sold in the commercial area as well, and that he has seen a report saying that 800 billion will come due this fall, 900 billion the following year, and 2 trillion the year after that. He said nobody will be able to meet the refinancing requirements, and that this is going to be bigger than the residential real estate problem.
I don't know as much about commercial lending, and he told me so many things that I forgot half of what he said, but I did get the impression that its going to get alot uglier. With this in mind, it really doesn't matter what the Dow does now, because it is only temporary at best. All positive signs that the media wants you to believe in is nothing more than a head fake. The media wants you to believe that the Messiah has fixed the problem, now just go spend money again. This ship is sinking. NBC/CBS/ABC/CNN/MSNBC is telling us all will be fine, while those of us who know better are already putting on lifejackets.

I'd say your cousin is likely correct -and you're lucky to have a cousin so well informed..

Posted: 6/12/2009 8:22:30 AM EDT

[#12]

I write commercial property insurance and I can tell you that people are non-renewing because they are walking away from properties at a rapid rate. I even had a company walk away from vacant land that was worth more than the mortgage. The bank will never be able to sell the land, which is why the insured is walking away from it in the first place. This is set to get really bad, really soon.

Posted: 6/12/2009 9:51:59 AM EDT

[#13]

Quoted:
I write commercial property insurance and I can tell you that people are non-renewing because they are walking away from properties at a rapid rate. I even had a company walk away from vacant land that was worth more than the mortgage. The bank will never be able to sell the land, which is why the insured is walking away from it in the first place. This is set to get really bad, really soon.

how soon is really soon? will joe average feel it immediately or is it going to take a while to trickle down?

i'm amazed at how few people know how perilous the situation is right now. i'm guessing not many have been hurt by what's happening, or at least not many that i talk w/.

Posted: 6/12/2009 10:21:46 AM EDT

[#14]

I myself noticed all the empty big "anchor" stores in one of the local malls - makes me wonder how the mall owner makes his payments. On residential, I also see a lot of houses on the market that were on there 2 years ago.

Posted: 6/12/2009 10:39:17 AM EDT

[#15]

Quoted:

Quoted:
I write commercial property insurance and I can tell you that people are non-renewing because they are walking away from properties at a rapid rate. I even had a company walk away from vacant land that was worth more than the mortgage. The bank will never be able to sell the land, which is why the insured is walking away from it in the first place. This is set to get really bad, really soon.

how soon is really soon? will joe average feel it immediately or is it going to take a while to trickle down?

i'm amazed at how few people know how perilous the situation is right now. i'm guessing not many have been hurt by what's happening, or at least not many that i talk w/.

This is affecting me right now- the less insurance policies I have, the less money I make. The less insurance policies open, the fewer agencies are needed. Now, if for some magical reason new businesses start opening up, then I will be busy again, but right now my office is dead.

It may not affect someone non-retail who works a blue collar job, but its coming soon. Your pension owns a lot of commercial real estate bonds, that I am sure of. That is when the S will really HTF.

Posted: 6/12/2009 11:02:46 AM EDT

[#16]

I emailed my broker about this and this is what he said:

the probs with commercial RE are pretty much known-probably already built in to equity prices. Only if it gets worse than expected. At least until lately-most have expected worse than has actually happened. This usually marks the beginnings of recovery. What seems sometimes so obvious....is not. Happy to discuss though.

what in the world did he say?

Posted: 6/12/2009 11:26:45 AM EDT

[#17]

Quoted:
well I work in Charlotte NC. My company warehouse is in an industrial park that has 12, 10 to 15000 sq ft warehouses in it. 3 are rented out. huge office space across from us completely empty. went down a road the other day that had tons of empty buisnesses. This was the hot spot of the country not long ago. You're right, this is gonna be ugly

OMG I love you.

Posted: 6/12/2009 11:35:43 AM EDT

[#18]

Quoted:
I emailed my broker about this and this is what he said:

the probs with commercial RE are pretty much known-probably already built in to equity prices. Only if it gets worse than expected. At least until lately-most have expected worse than has actually happened. This usually marks the beginnings of recovery. What seems sometimes so obvious....is not. Happy to discuss though.

what in the world did he say?

He said that this isn't news to investors in the commercial RE market, and they have already acted on the information.

Posted: 6/12/2009 11:47:38 AM EDT

[#19]

Well . . . Attended a Financial Crimes Seminar just this past weekend. Major problem with loan fraud right now is with 1 to 4 family homes.

Speaker stressed that the commercial fraud has yet to "come to a head". Claimed the commercial fraud bubble will burst in the next nine months. Claimed it could get ugly –– real ugly real fast . . . .

Posted: 6/12/2009 12:43:49 PM EDT

[#20]

Quoted:

Quoted:
well I work in Charlotte NC. My company warehouse is in an industrial park that has 12, 10 to 15000 sq ft warehouses in it. 3 are rented out. huge office space across from us completely empty. went down a road the other day that had tons of empty buisnesses. This was the hot spot of the country not long ago. You're right, this is gonna be ugly

OMG I love you.

Correct usage of your / you're?

Posted: 6/12/2009 12:56:18 PM EDT

[#21]

Quoted:

Quoted:
well I work in Charlotte NC. My company warehouse is in an industrial park that has 12, 10 to 15000 sq ft warehouses in it. 3 are rented out. huge office space across from us completely empty. went down a road the other day that had tons of empty buisnesses. This was the hot spot of the country not long ago. You're right, this is gonna be ugly

OMG I love you.

Correct usage of your / you're?

I also got a little tingle...

Posted: 6/12/2009 2:00:57 PM EDT

[#22]

People are looking so anxious for some good signs that they are blowing even the slightest hints of recovery out of proportion. For example; The last unemployment numbers weren't as bad as expected not because they are laying off less people, but because most businesses have cut to the bone and can't cut any more people without compromising their operation.

Events to keep an eye on:
After the holiday season is over, what will the financial reports look like? A lot of these shopping centers weren't built around a business model that can support two back to back holiday seasons that are well below their goals. Once those anchors go, they will take many other businesses with them.

Mid term elections: Yes we've seen the Tea Parties and heard all the talk, but if a lot of people are not voted out of office, they are not going to get the message. Furthermore, if the party that controls the house/senate now still controls it after the mid-terms, that will be interpreted and spun as another "mandate." The media and the party in power will say, "since they won the elections, obviously the American people embrace the economic policies of our party." The sad fact will be that in many ways, they will be correct.

Will the President be re-elected? Look at how much he did in his 1st 100 days. Now imagine what he will be able to push through on the economic side when he does not have to worry about another election.

Posted: 6/12/2009 4:31:38 PM EDT

[#23]

I get a little insight into commercial real estate in my business. What I'm hearing is that overall, properties are ~40% vacant right now and that there will be no significant new construction (save for gov't of course) for 30 years!

Posted: 6/12/2009 4:38:06 PM EDT

[#24]

To be blunt but truthful. I don't care about any of this. I am far enough along in my evolution that it really is nothing more than what it is. We prepare and then we live our lives. Prepare a little bit more each day. The rest is just garnish.

Does this attitude mean I am getting better or getting worse?

Posted: 6/12/2009 4:39:40 PM EDT

[#25]

Quoted:
People are looking so anxious for some good signs that they are blowing even the slightest hints of recovery out of proportion. For example; The last unemployment numbers weren't as bad as expected not because they are laying off less people, but because most businesses have cut to the bone and can't cut any more people without compromising their operation.

Or as many have happened to them, their unemployment benefits have run out

Posted: 6/12/2009 4:42:11 PM EDT

[#26]

I have been hearing the same, what I cant figure out is, it is no secret, so why is everyone burying their head in sand? Most, if not all economists know this bubble is about to burst why are they not being more vocal now?

Posted: 6/12/2009 6:16:45 PM EDT

[#27]

Quoted:
I have been hearing the same, what I cant figure out is, it is no secret, so why is everyone burying their head in sand? Most, if not all economists know this bubble is about to burst why are they not being more vocal now?

I remember one Gentleman back in Dec of 2006 on Fox business telling people the housing bubble was going to burst in 2007,
while others on the same show said 10pct increase in housing values. They laughed at him. He said they are still laughing at
him on what he thinks now is going to happen.

We are screwed in so many ways. One example, this analog to digital conversion, they had to postpone it how many months,
and still people in the 7 figures were rushing out today to buy a converter. I find it hilarious, but sad.

Posted: 6/12/2009 7:59:01 PM EDT

[#28]

tfl

Posted: 6/12/2009 11:27:00 PM EDT

[#29]

Yum, another shit sandwich. I am laughing at all of these "experts" on the news trying to convince the sheep that the economy is recovering. I am fairly certain we haven't hit bottom yet, or if we are even close. In 2004 when I liquidated my property's in Las Vegas because I didn't figure the values would hold, people told me I was turning my back on a fortune. I cant believe it took as long as it did to collapse. There are more collapses to come. Just a matter of time.

Posted: 6/13/2009 3:18:28 AM EDT

[#30]

This economic train wreck is one that is happening in slow motion.

Commercial property and assocaited lending is just another one of the slow motion dominoes that will fall.
Another one is the "Personal Credit Crisis" which is huge. The Fed.Gov stepped in to tamp it down for a while, because if the Perosnal Credit Crisis hit at the same time we were in the Bank BailOut Biz, we risked a complete collapse.

They think if they control each domino, and time the fall of each of these dominoes, they can mitigate the overall problem. FDR thought he could make things better and simply prolonged the agony for a whole decade.

When the problems stem from lending and money supply, then eveything that depends on that basic building block is affected across the board. That's our problem, everything depends on the efficient flow of money.

The economy is like a rubber garden hose, the water flowing through it is money, banking and lending, cash flow. The Fed.Gov is trying to fix the problem by stepping on the hose in various places and opening the spigot more, despite the fact the well is running dry.

Get out of debt, live within your means, and prepare for a big round of inflation.
Buy any durable goods you want now, while your dollars are worth something (but don't borrow to do so).

We have several more dominoes to fall, Commercial property, Personal credit, and some unknowns.

Unemployment is going to be a drag on the economy for years to come. Less tax reveues, less consumer spending, and more payouts in the form of unemployment benefits.
Hurray for Big.Gov!!

Posted: 6/13/2009 4:41:12 AM EDT

[#31]

I understood the effect of the residential housing bubble on the market. But what effect would the commercial bubble have? Im not being a smart ass, Im just not in the know like some of you and dont really understand real estate.

I too have seen a ton of empty businesses.

Posted: 6/13/2009 5:40:40 AM EDT

[#32]

Very interesting..... and concerning.

In Mark Levin's book, Liberty and Tyranny, Mark references this article which put the CRA*-eligible home loans at $4.5 trillion.

Looks like the commercial dollar amount is similar, although any defaults would most likely be caused by the poor economy, and not unqualified borrowers (CRA).

*Community Reinvestment Act (CRA), passed by congress in 1977, it severly lowered lending standards for mortgages, causing most of the bad loans we see today.

Posted: 6/13/2009 5:45:13 AM EDT

[#33]

Quoted:
I understood the effect of the residential housing bubble on the market. But what effect would the commercial bubble have? Im not being a smart ass, Im just not in the know like some of you and dont really understand real estate.
I too have seen a ton of empty businesses.

It will affect the market the same way the bad home loans did.

One way it hurts the market is that the banks lose a ton of money everytime someone doesn't pay their mortgage. The banks can lose so much from this, they can run completely out of money. If the bank doesn't have any money, it cannot make new loans, so you can't get a car loan even with a great credit score.

Another way it hurts is because the banks can sell the loans to other banks and Wall Street as derivatives, who then package and sell them as investments. When the mortgage defaults, the investor loses the money. This really hurt because it allowed the original bank that made the bad loan to make more bad loans, because it freed up their responsibilty for the first loan. So basically even more financial institutions were damaged, not just the original bank. This is how AIG went down. When AIG goes down, so does anyone who owned shares of their company. This is why lots of 401k accounts are in the toilet.

Posted: 6/13/2009 6:44:00 AM EDT

[#34]

The whole economy is coasting on fumes....think about it. 2-3m jobs lost in the last year. Alot were white collar jobs in autos and aerospace, defense, that aren't coming back soon.... those folk are not going to be buying homes, cars, or any major appliances or purchases.... without that demand, there's got to be a macro-economic effect.

Also, what happens in a few months when each month 600,000 people run out of unemployment insurance? Ugly late summer and fall....

We have 2-3 months gents, before it gets really crazy.

Posted: 6/13/2009 7:35:46 AM EDT

[#35]

Quoted:
well I work in Charlotte NC. My company warehouse is in an industrial park that has 12, 10 to 15000 sq ft warehouses in it. 3 are rented out. huge office space across from us completely empty. went down a road the other day that had tons of empty buisnesses. This was the hot spot of the country not long ago. You're right, this is gonna be ugly

I would not be too worried just yet.

The fact is that every boom is followed by a bust, and the scope of the bust is often related to how much stuff was built on spec.

It will work itself out over time. At some point there will be a lot of inexpensive commercial, office, and retail property on the market that someone will buy and put to good use.

Posted: 6/13/2009 7:39:04 AM EDT

[#36]

Quoted:

Quoted:
People are looking so anxious for some good signs that they are blowing even the slightest hints of recovery out of proportion. For example; The last unemployment numbers weren't as bad as expected not because they are laying off less people, but because most businesses have cut to the bone and can't cut any more people without compromising their operation.

Or as many have happened to them, their unemployment benefits have run out

people whose unemployment benefits have run out are still counted as unemployed.

Posted: 6/13/2009 7:40:34 AM EDT

[#37]

I thought they were counted as discouraged workers.

Posted: 6/13/2009 9:00:26 AM EDT

[#38]

Quoted:

Quoted:
People are looking so anxious for some good signs that they are blowing even the slightest hints of recovery out of proportion. For example; The last unemployment numbers weren't as bad as expected not because they are laying off less people, but because most businesses have cut to the bone and can't cut any more people without compromising their operation.

Or as many have happened to them, their unemployment benefits have run out

people whose unemployment benefits have run out are still counted as unemployed.

No they are not, the numbers stated are first time filers or who have not filed for an extended period. Those numbers are also very fudged too.

Posted: 6/13/2009 9:14:50 AM EDT

[#39]

Quoted:
I had a talk with my cousin tonight who is in commercial real estate lending. He told me that troubles lie ahead in this area. He said that these same mortgage backed securities were sold in the commercial area as well, and that he has seen a report saying that 800 billion will come due this fall, 900 billion the following year, and 2 trillion the year after that. He said nobody will be able to meet the refinancing requirements, and that this is going to be bigger than the residential real estate problem.
I don't know as much about commercial lending, and he told me so many things that I forgot half of what he said, but I did get the impression that its going to get alot uglier. With this in mind, it really doesn't matter what the Dow does now, because it is only temporary at best. All positive signs that the media wants you to believe in is nothing more than a head fake. The media wants you to believe that the Messiah has fixed the problem, now just go spend money again. This ship is sinking. NBC/CBS/ABC/CNN/MSNBC is telling us all will be fine, while those of us who know better are already putting on lifejackets.

A LOT of these assets are held in REITs. Yes most have loans to roll over but each REIT might be 5% to 20% of their portfolio. The REITs in a lot of cases are doing secondary offerings of stock to raise this cash instead of counting on refinancing. Check out Boston Properties BXP as an example.

I was thinking the same thing and we would see a huge crash in Comercial Real Estate market. Now I think it will get ugly but not as bad as some think.

Posted: 6/13/2009 10:31:44 AM EDT

[#40]

Quoted:

Quoted:
well I work in Charlotte NC. My company warehouse is in an industrial park that has 12, 10 to 15000 sq ft warehouses in it. 3 are rented out. huge office space across from us completely empty. went down a road the other day that had tons of empty buisnesses. This was the hot spot of the country not long ago. You're right, this is gonna be ugly

OMG I love you.

dont worry, ill screw up somthing else.......and unless the M stands for Mary or Michelle im not interested

Posted: 6/13/2009 10:33:44 AM EDT

[#41]

Quoted:

Quoted:
well I work in Charlotte NC. My company warehouse is in an industrial park that has 12, 10 to 15000 sq ft warehouses in it. 3 are rented out. huge office space across from us completely empty. went down a road the other day that had tons of empty buisnesses. This was the hot spot of the country not long ago. You're right, this is gonna be ugly

OMG I love you.

Correct usage of your / you're?

I also got a little tingle...

OK take a cold shower you two, you're creepin me out

Posted: 6/13/2009 3:52:59 PM EDT

[#42]

Quoted:

Quoted:
People are looking so anxious for some good signs that they are blowing even the slightest hints of recovery out of proportion. For example; The last unemployment numbers weren't as bad as expected not because they are laying off less people, but because most businesses have cut to the bone and can't cut any more people without compromising their operation.

Or as many have happened to them, their unemployment benefits have run out

people whose unemployment benefits have run out are still counted as unemployed.

They should be but only the ones drawing bennifits are.

Posted: 6/14/2009 7:12:59 PM EDT

[#43]

Quoted:

Quoted:
People are looking so anxious for some good signs that they are blowing even the slightest hints of recovery out of proportion. For example; The last unemployment numbers weren't as bad as expected not because they are laying off less people, but because most businesses have cut to the bone and can't cut any more people without compromising their operation.

Or as many have happened to them, their unemployment benefits have run out

people whose unemployment benefits have run out are still counted as unemployed.

They should be but only the ones drawing bennifits are.

And we cant forget all the construction workers WHO did go back to work when the weather got warmer, how do they count seasonal unemployment?

Posted: 6/14/2009 8:01:39 PM EDT

[#44]

There is no FNMA that President Barry can mandate lending for on the commercial side.

This is likely a very real possiblility.

Posted: 6/14/2009 8:53:17 PM EDT

[#45]

Guys, I can't put words together to describe the effect the economy has had on local business. Strip malls are 1/3 occupied, many long standing businesses are shuttered, restaurants closed a long time ago and starting to look dilapidated. You have to understand that even though it's Detroit, the suburbs are very clean, modern and have always had a lot of amenities for the people who work 24 hours a day making cars or supporting those who do. Now you drive down the street and wonder if where you are going will still be in business when you get there. I've lost several of my old haunts in the last year, not to mention that only two of the employers I have ever had are still in business.

Nearly all of these businesses are rented, and even if they aren't it's going to absolutely SUCK to be a real estate investor with commercial property in the coming years. I half way jokingly say "this may be Southeast Michigan, but it's coming to your small town too", but unfortunately I think that it will be happening to a lot of people.

Posted: 6/14/2009 9:36:12 PM EDT

[#46]

The Chyrsler & GM bankruptcy/downsizing and Ford downsizing hasn't fully rippled through the economy yet. Many of the car dealers are in little small 'burgs, they will be hit hard in the fall/Christmas time. What are they going to do with the huge lots these dealers formerly occupied? There is also be less need for companies serving these dealers etc etc.

The mainstream news media is declaring that the recession has bottomed out, I think they are just starting to believe their own hype.

Posted: 6/15/2009 3:55:37 AM EDT

[#47]

Here's another question - when a home that is rented out goes into foreclosure, renters get evicted. Is the same true of a commercial property in foreclosure? Do the tenants get evicted?

Also, consider that towns and counties typically don't collect property taxes from properties in foreclosure. Localities that depend on property taxes on commercial real-estate are going to make up the shortfall somewhere...

Posted: 6/15/2009 4:04:17 AM EDT

[#48]

Quoted:
Here's another question - when a home that is rented out goes into foreclosure, renters get evicted. Is the same true of a commercial property in foreclosure? Do the tenants get evicted?

Also, consider that towns and counties typically don't collect property taxes from properties in foreclosure. Localities that depend on property taxes on commercial real-estate are going to make up the shortfall somewhere...

The tax issue is what concerns me.

Welfare
Healthcare "reform"
Loss of tax revenue due to consumer slow-downs (ie sales taxes)
Loss of tax revenue due to commercial slow-downs (closings, loss of revenue, etc)

all this equals more taxes to offset the difference, since we're all "fiscally aware" now that the porkulus bills are all passed. My guess is 10-15 years of Suck.

Posted: 6/15/2009 4:45:08 AM EDT

[#49]

Ive been driving different ways home from work.......im seeing 4 sale signs popping up on property all over the place......wish I had more cash

Posted: 6/15/2009 6:21:11 AM EDT

[#50]

Quoted:

Quoted:
I understood the effect of the residential housing bubble on the market. But what effect would the commercial bubble have? Im not being a smart ass, Im just not in the know like some of you and dont really understand real estate.
I too have seen a ton of empty businesses.

It will affect the market the same way the bad home loans did.

One way it hurts the market is that the banks lose a ton of money everytime someone doesn't pay their mortgage. The banks can lose so much from this, they can run completely out of money. If the bank doesn't have any money, it cannot make new loans, so you can't get a car loan even with a great credit score.

Another way it hurts is because the banks can sell the loans to other banks and Wall Street as derivatives, who then package and sell them as investments. When the mortgage defaults, the investor loses the money. This really hurt because it allowed the original bank that made the bad loan to make more bad loans, because it freed up their responsibilty for the first loan. So basically even more financial institutions were damaged, not just the original bank. This is how AIG went down. When AIG goes down, so does anyone who owned shares of their company. This is why lots of 401k accounts are in the toilet.

There will also be surplus buildings to lease for a long time, which means a lot less construction jobs. On the bright side there's not nearly as many illegals around here.

[ARCHIVED THREAD] - The commercial real estate timebomb (Page 1 of 2)

Outdoors » Survival Discussions

Warning

Confirm Action

About AR15.COM

Stay Connected

Newsletter

Contact Us