Second Wave Of The Credit Crisis: Collapsing Commercial Real Estate
Investors Business Daily reports: The recent uptick in home sales, green shoots of new housing starts and rebounding stock market may suggest that the long-awaited turn in the U.S. economy is here.
But is this daylight at the end of the tunnel or the beam of an oncoming locomotive of commercial real estate insolvency coming down the tracks on a collision course with a shaky economy?
Commercial real estate (CRE), valued at $3.5 trillion in the U.S., has experienced a 39% decline in prices from the peak only two years ago, according to the MIT Center for Real Estate.
This drop is greater than the 27% commercial real estate decline associated with the longer savings and loan crisis of the late '80s and early '90s that precipitated government Resolution Trust Corp. (RTC) seizures and auctions.
Additionally, the 18% price decline in the second quarter was the largest three-month drop in the 25 years since MIT first published the CRE price index.
Real Capital Analytics, the source of the same-site transaction data reports that over $2 trillion in commercial properties bought or refinanced in the past five years are upside down on their loans — having fallen below the finance or purchase price.
It appears owners have lost their entire down payments on $1.3 trillion worth of property. In the first six months of this year, commercial properties in default, foreclosure or bankruptcy doubled. That pace may accelerate because commercial usually lags residential by a year.
View the full article on Investors Business Daily: Second Wave Of The Credit Crisis: Collapsing Commercial Real Estate
Posted by: Matthew Stone