Friday, May 01, 2009

First It Was Houses, Now It's the Malls

Trying to find the eye in America's fiscal hurricane isn't easy but it is generally considered to be residential real estate and the myriad ways that was gamed by homeowners, mortgage lenders, securities traders and the political establishment.

Now America is on the verge of being hit by another wave - commercial real estate. From McClatchey Newspapers:

Thousands of commercial mortgages valued at hundreds of billions of dollars are approaching their renewal dates, and by some estimates, two out of three no longer will meet the original loan conditions and won't be able to refinance. With prices for commercial properties expected to plunge, a vicious cycle could unfold, much as it has in the nation's housing market.

"It's the next wave to hit. It's the next round of bad news," said Scott Talbott, the senior vice president of government affairs for the Financial Services Roundtable, a trade group for big banks and other financial institutions who are collectively concerned about the coming problems.

A commercial mortgage meltdown is likely to prolong the nation's economic recovery. Falling prices of commercial real estate would lead to additional bank losses at a time when banks already are sapped by home mortgage defaults and soaring credit card defaults. This could lead to future additional taxpayer assistance for the banks.

No comments: