A posting “How Commercial Real Estate Could Trigger a Double-Dip” continues:
“Reports that commercial real estate (CRE) is suffering from a double whammy of soaring vacancies and declining valuations have been making news recently with sobering regularity. DailyFinance addressed the risks that CRE meltdowns pose to banks in early December. ….
“Four primary factors are behind the tumble in CRE prices — and they’re eerily similar to those that powered the residential housing boom and bust:
- Overbuilding in marginal locales that lacked adequate jobs and services to support massive new commercial construction (malls, hotels, business parks, resorts, etc.)
- Excessive valuations fueled by low interest rates and easy credit
- Highly leveraged bets on future appreciation
- A banking sector that’s extremely vulnerable to write-downs and losses from foreclosures”
WATCHDOG: Much of the hotel, office building and shopping center industries are on the cusp of loan default or already not making debt payments, effectively hamstringing the banking industry from being able to loosen credit to small businesses.
The Obama Administration tells bankers “Loosen up your lending.” The Controller of the Currency and other banking regulators tell them “Don’t you dare!”
The collapse of Commercial Real Estate poses the greatest threat to the economy’s recovery and could bring on a double dip recession with dire implications.
Hold onto your seat. This bumpy ride isn’t over yet.
