Commercial Real Estate Prices

Loan Maturity

Posted on Thursday, December 31, 2009

For anyone who questions whether or not there is a looming commercail real estate crisis...

Just under $400 billion in CRE matured this year and we are already seeing issues...many are only in the beginning stages of the default and forelcosure process now. Many presumed workouts will fail.

ANOTHER $400 billion in CRE loans matures this year.

YET ANOTHER $425 billion matures in 2011.

AND ANOTHER $400 billion in 2012 and 2013 each.

Most of this is held by banks.

Translates to 4 times what we're already beginning to see now in terms of commercial forelcosures and bank failures.

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Since the subprime mortgage crisis was sufficient to reduce the major stock indices by more than half and bring about a legendary worldwide credit crisis and recession, shouldn't the financial markets be starting to discount the effects of this looming commercial real estate crisis? It would appear to me that sometime in 2010, one should be able to reap handsome profits by shorting the stock market in general and financial stocks in particular. Considering how much the stock market has rallied since March 2009, it seems that people are ignoring the dangers out there and are assuming that the economy will recover just like it always has since World War II. However, I think that the bursting of our various asset bubbles makes these economic times different than any we have experienced since World War II. Hence, I would not be making any long term bets in the stock market now.

Martin Hampson 1/5/2010
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