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Commercial Real Estate Collapse Picking Up Steam

Posted Mar 26, 2009 08:40am EDT by Joe Weisenthal

From The Business Insider, March 26, 2009:

Even if banks were being completely honest about their marks -- which we know they're not -- the accelerating collapse of the commercial real estate market would mean billions more in writedowns.

WSJ: The delinquency rate on about $700 billion in securitized loans backed by office buildings, hotels, stores and other investment property has more than doubled since September to 1.8% this month, according to data provided to The Wall Street Journal by Deutsche Bank AG. While that's low compared with the home-mortgage delinquency rate, it's just short of the highest rate during the last downturn early this decade.

Some experts say it now looks as if the current commercial real-estate slump will rival or even exceed the one in the early 1990s, when bad commercial-property debt played a big role in dragging the economy into a recession. Then, close to 1,000 U.S. banks and savings institutions failed. Lenders took about $48.5 billion in charges on commercial real-estate debt between 1990 and 1995, representing 7.9% of such debt outstanding. Read the whole thing >

This is one area in particular where banks are carrying assets an unrealistically high levels. Citigroup (C) is marking many of its loans at .95 on the dollar and up. And though it's already rivaling the last bust, our sense is that this will prove to be far worse than that one, deliquency-wise, when all is said and done.

For more coverage, see The Business Insider.

108 Comments

franck s
franck s - Thursday March 26, 2009 08:45AM EDT

This is Birmingham area, and realtors say commercial real estate is the last leg.

Yahoo! Finance User
Yahoo! Finance User - Thursday March 26, 2009 08:52AM EDT

When will these banks be REQUIRED to tell the truth about their marks. I suppose they won't, because that would make it more difficult to steal taxpayer dollars. This may be the most criminal financial system in the world.

Frank
Frank - Thursday March 26, 2009 09:07AM EDT

Do not worry The government is working had at weaving blankets of money to keep the real estate warm, If it does not remain warm at least it works to cover up the problem. And acts as a bungee if it falls too much! The bungee will not break. It is made in the USA by a messaiah

__A_YAHOO_USER__
__A_YAHOO_USER__ - Thursday March 26, 2009 09:10AM EDT

Yes the commercial property collapse but it does not mean it will not recover.......The only question is....when.......once the economic recovery start it will start to grow but this time at a reasonable growth not on the basis of speculation...The Commerical Properties once is rise is not artificail but according to the reasonable and fair market value.....I think the hiusing Market show some sign of growth last month again.....It will take time.......but the time is on their side this time.

Turner
Turner - Thursday March 26, 2009 09:11AM EDT

Good one user. Obama's plans are not designed to work. They are designed to appear to be doing something by loading up debt. When the real **** hits the fan they will ask for all power and authority. They are breaking down our checks and balances governing system, then they will take all your money.

sirdon2
sirdon2 - Thursday March 26, 2009 09:30AM EDT

Soon a revolution will start to form in our country, when all the people realize that the Messiah has taken control of your lives with the powers being asked for by the Sec. Tres.. On Tuesdays press conference we all heard how the economy was turning around yet 7.03 million are now collecting unemployment, that does not include those who chose retirement, went back to school, were part timers, or owned their own business. The commercial real estate will collapse causing more bailout money needed, then more layoffs, tighter lending, dollar falling, China calling in our debt, etc... The Government took almost a year to say we are in a recession, They will never say Depression even when that is what we are in right now. Tea party time.

Reedersong
Reedersong - Thursday March 26, 2009 09:33AM EDT

Touch the stove again?

Yahoo! Finance User
Yahoo! Finance User - Thursday March 26, 2009 09:36AM EDT

The author of this must have a PhD. If you don't think this is already baked in then you don't understand the market at all.

STORMSTOCKER1
STORMSTOCKER1 - Thursday March 26, 2009 09:39AM EDT

NEVER IN THE COURSE OF USA FINANCIAL HISTORY, HAVE SO MANY, BEEN REQUIRED TO GIVE SO MUCH, TO SO FEW.

Kelly P
Kelly P - Thursday March 26, 2009 09:41AM EDT

This was the next domino to fall according to Gerald Celente.

igotid35
igotid35 - Thursday March 26, 2009 09:44AM EDT

"Obama's plans are not designed to work. ... They are breaking down our checks and balances governing system, then they will take all your money." Don't have any left... Bush saw to that.

Yahoo! Finance User
Yahoo! Finance User - Thursday March 26, 2009 09:45AM EDT

Under The Financial "WIZARD" OF NOBAMA...."THE PRINCE OF DARKNESS"....Commercial Real Estate..Is The NEXT "TZUNAMI"...OF Foreclosures,Vacancies, Empty & Vacant Shopping Centers,.....NOBAMA HAS CREATED An "ATMOSPHERE" OF FEAR & DESTRUCTION IN OUR COUNTRY....WE ARE "DOOMED"...Thanks to...THE PRINCE OF "DARKNESS".....America Will BE A Third World Country....In 3 Years....

ezshooter
ezshooter - Thursday March 26, 2009 09:46AM EDT

Will the US = India before we see jobs back in America? If so, what will our real estate cost?

Jerry E
Jerry E - Thursday March 26, 2009 09:46AM EDT

All this talk about the Messiah... what about the bushleaguer that got us into this mess? You people are sheep!

Cat_in_a_bank
Cat_in_a_bank - Thursday March 26, 2009 09:54AM EDT

I told you.

__A_YAHOO_USER__
__A_YAHOO_USER__ - Thursday March 26, 2009 09:59AM EDT

If time is favorable to the Commercial Properties it will go up but that time is a inch too short but it wil get there soon.Once it there it will inch by inch too far....Like train once it goes it will go instoppable.

david
david - Thursday March 26, 2009 10:00AM EDT

Hunting, fishing, living in the outdoors, the way things are going we will all be able to enjoy these wonderful parts of nature. Sadly our children and elderly parents will be there with us.

__A_YAHOO_USER__
__A_YAHOO_USER__ - Thursday March 26, 2009 10:03AM EDT

It is a matter of perception the back of mind once the confidence come it will accelerate....I think there is a good reason now that it will grow to more appropriete why not move until November..From them we are sure.......At the momnet there are now sign of business activities that will favor groth in that sector.

Yahoo! Finance User
Yahoo! Finance User - Thursday March 26, 2009 10:04AM EDT

Just Wait Until...."THE CHINESE, Come LOOKING"..For THEIR $ 3.6 TRILLION DOLLARS BACK....HA,HA,HA,HA,HA,HA,.....THEN YOU WILL SEE THE ..."THE REAL TZUNAMI"... AMERICA YOU "WANTED AN CHANGE"...You Got One COMING....BABY....BANKRUPTCY!!!!!!!!

Cat_in_a_bank
Cat_in_a_bank - Thursday March 26, 2009 10:05AM EDT

Yes, it’s heating UP. It's spring. Last spring I stopped at local supplier to by few pieces of siding for repair. He told somebody on a phone - It finally moved from dead nothing. They were dead empty two month later when after winter repairs has been done.

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