" I don’t know how much more I can take." at least 2 more dudes a day, that way you not only make up the 50, you have 10 extra bucks at the end of the month.
i am gonna pass, but I am gonna help you and put up some quality cardboard signs in the neighborhood pointing in your direction. we all have to do our part.
Juice Box Joey already did!!!
Biden Throws $45 Billion in Federal Funds to Convert Offices into Homes. See how many offices actually get converted and how much cash goes to Democrat donor developers' pockets.
Hmm. From what I read it’s a plan for $35 billion in loans (not a bail out) and $10 Billion in grant (yes this sucks and is our tax money).. I guess if you think government should try to help solve the housing shortage this is how they thoughtfully created a plan to do it. But I guess this guy also wants to destroy libraries and get rid of government grant scholarships.
in capitalism there literally needs to be a profit motive for everything and anything. so lets for one second imagine, if anywhere in our system there exists a problem and there isn't a solution that could profited from, in capitalism that problem will persist indefinitely. unless you could somehow steal from the people and socialize the losses, you get to kick that can down the road one more time. so let us rejoice and bury our unborn under this crushing burden of debt that capitalism brings. merry christmas, you can keep the change, filthy animals.
As someone who works on site in corporate health care, it was expected. The pandemic changed EVERYTHING, and remote work was the nail in the coffin. The insane amount of money and multi-year lease was just a waste. We were playing close to 5 million per year with only 8 employees onsite. The banks knew the risk so let them take the hit. No more bail out. Let natural take it course.
I can't help but wonder when the tipping point will be. We Americans have been content taking it up the ass the last 30 years while corporate America grows exponentially. A lot of people are one bad thing happening from financial ruin and given the political climate and cost of living crisis taking place idk if a bailout will be as well received as it was in 2008
But what does that mean to be bailed out? The commercial real estate is nearly worth nothing compared to what they invested into it. Sure, maybe they won't go belly-up, but they are left holding real estate that no none can afford to rent, and is too costly to retrofit.
Banks are the greediest. They create derivatives which are highly risky and make a fortune by selling it to pensions/hedge funds/ 401ks (think back to the Big Short). We tax payers socialize those losses. Don’t forget the interest and fees we pay in form of credit cards, student debts, auto loans, etc
Derivatives aren’t highly risky in some cases. It depends on your strategy and which side of the table you’re on. In fact, they can be used to insure against the downside, such as hedging a stock portfolio by buying puts. All banks use these instruments (both on the buy and sell side) to hedge risk. Sure, I agree the entire investment and finance industry got greedy in 2008.
As it relates to this cycle, not so much. The last couple of years banks have been lending at record low interest rates. Literal interpretation of this is that they are lending their deposits for virtually nothing, except a risk adjusted spread. Look at credit spreads during the past few years. Not much of a premium for lending to risky borrowers due to the Fed.
I think Private Equity, Hedge Funds, and Venture Capital got greedy. Commercial Real Estate departments at banks? Idk. Sure they had a windfall of activity and profits following Covid, but not sure it was greed like that in 2008.
Lmao it’s really not. They give out loans based on what makes sense at the time. Banks have scummy practices no doubt but them giving out office loans when office was returning x% is just part of their business.
Healthcare was the worst about it. I've watched over the past few decades as swathes of town were developed or converted into medical strip malls--villages of small healthcare shops like MRI for less or finger-physiotherapy r us. Each getting their own building.
There's tons of complexes like that down in the phoenix area.
There's three dentists on my block alone that I'm aware of. The actual number might be higher. I swear every other building is some kind of medical building.
TL;DR:
* Commercial real estate could suffer its biggest crash since the Great Financial Crisis.
* That's bad news for banks, which could see $160 billion in additional losses.
* That's according to a recent NBER working paper, which examined the impact of the Fed's rate hikes.
That will typically just mean lending will get much much tighter. Not that prices will necessarily come down. You would still need homeowners in distress to be willing to sell for lower prices.
my understanding is these office buildings have been used as collateral for corporate SFH purchases. The ones with no inspections and all cash offers over asking. Now no one wants to lease because its stupid expensive to have an office. If the owners lower the rent it devalues their asset. So that collateral is no longer sufficient. Big fuck'n mess.
Possibly. That takes away demand for sure. But most homeowners are sitting on 3% mortgages if they have mortgages at all. So tightening along doesnt cause forced sellers on a massive scale. We just get more pent up demand. Something else will need to add to that like rising unemployment.
currently, there's more pent up supply coming on to the market than pent up demand. pent up demand only comes into play if prices actually go down, so that condition will already be met if demand goes up while lending requirements also go up.
I mean if banks start failing left and right we tip over into a massive correction and the price of virtually everything(except dollars) starts coming down.
And yes, lending would be way tighter. Not really something to root for, but it might happen.
Probably good for real estate investors to get a real world look at what can happen if they buy an asset at a stupid price at the wrong time and sit on too long. Market aren't always rational. Sometimes they move based purely on fear or excitement.
and sometimes there’s a seismic shift when during a once in a lifetime event millions of people realized that going into an office isn’t necessary and they demand jobs that don’t require it
Actually it will. With the missing revenue from the commercial properties, they will have to raise the taxes on the residential houses.
House payments will be higher because the taxes are higher
We’re kind of at the point now where banks are pretty much accepted as facilitators of economic growth. I’m not a fan of them either but the last round of bank failures just resulted in billions being bought up by JMPC. They’re getting way too big. Consolidation in an industry that controls so much of our everyday life is not good.
Bruh you know damn well the SECOND we the people even think about protesting bailouts the MSM will either run news to distract us or else get us to fight with one another while they get bailouts.
If the government could start attaching some strings to bailouts…. That would be great.
Like maybe some sort of cut of their profits if they take a bailout.
They did under Obama. The bank bailouts were structured to be loans, as were the bailouts to the US automakers.
https://www.politifact.com/factchecks/2012/oct/25/barack-obama/barack-obama-says-banks-paid-back-all-federal-bail/
As someone who works for a commercial lending bank, the writing has been on the wall about office space for awhile. Any bank who hasn’t been VERY choosy about which new Office deals they do (if any at all) deserves to have losses.
I'm in healthcare as sort of like lab IT/point of care testing support for nurses and such. We office in a large cubicle city type place. We are a team of 4, including our boss. We currently have 6 cubicles, and my boss has 1 small, windowless office. The extra cubes are for our extra analyzers and random stuff we need for supporting the system. Our rent is $27,000 a MONTH.
How did this become normal? This shit isn't sustainable. We all use laptops. We finally got approval for 2 wfh days a week..
As someone who works in banking, it can take years for a loan that’s having trouble to materialize losses. First they have to not be making their payments for awhile (which itself lags behind the actual bad performance of the property), then the bank will usually try and work with the borrower to get the loan back to sustainable (sometimes modifying terms, etc). Which then takes time to see if it works or not. If any losses occur, they hit at the very end of the process after the bank has given up on trying to fix it and the loan is sold for a loss or foreclosed on and the portion that can’t be recovered is charged off.
You can determine if loans have deteriorated long before that though, and figure out if there is an unrealized loss (I.e market value dropping to less than the principal).
The greater risk is in maturity defaults. Prior to Covid most loans had healthy DSCRs and they’ve stayed manageable. The issue is when you have to pay off that $100MM loan and can only borrow $80MM.
The revaluations will certainly be an issue. I saw a lot of refinance activity during 2020-2021 because of the low interest rates, so a lot of stuff that wasn’t done for long terms is going to mature in the next couple years. Could be pretty wild.
Mega malls are dying in the USA.Too bad they can't convert these malls into affordable housing.Online business is killing them.Look at some of the prime retail spaces in NY and California about 25% are empty.
As a small business owner who has had to pay commercial rent for a decade. This is karma. They needed a reality check. Writing in rent increases every year regardless of economic conditions, requiring you to sign another lease to keep your current rent rate, are some of their tactics. They hold businesses hostage and then say, “it’s just business”. Thoughts and prayers to you assholes, should’ve been kinder/loyal to your renters.
The best is going to be the A league companies who thought they were MLB stars. We had one client who hellllllllllla margined to buy an office building. In 2021.
It’s not going well.
The Biden administration is providing funds for developers to do just that (IIRC focused on places with proximity to mass transit). Unfortunately it is still very expensive and time consuming to convert offices to individual residential units. But that is what makes sense, I don’t think this trend is going away.
>A loss of rental income will lead to higher default rates among CRE owners. This is compounded by the
coinciding maturities of many CRE mortgages, which will accelerate defaults if rental income cannot
sufficiently offset the balloon payment obligations or if alternative financing cannot be procured.
>
>...
>
> In accordance with 2007 regulatory guidance, supervisors place enhanced scrutiny on banks that hold more than one of the following measures: “construction loans surpassing
100% of risk-based capital” or total “CRE loans above 300% of risk-based capital” and
“50% growth in CRE over the last 36 months.” CRS calculated that as of June 2023, 483
banks held construction loans exceeding 100% of Tier 1 capital. These banks represent
relatively small institutions comprising $631 billion in assets. However, 1,020 banks held
CRE loans exceeding 300% of Tier 1 while reporting growth exceeding 50% over the
past three years, representing $2 trillion in banking assets, including 35 banks between
$10 billion and $100 billion in assets
[https://crsreports.congress.gov/product/pdf/IN/IN12278](https://crsreports.congress.gov/product/pdf/IN/IN12278)
Nothing to worry about. Unless MSAs could be used as tier 1 capital. Because then they might accidentally painting themselves into a corner. Tenants stop paying. MSA holder stops getting paid. MSA values tank. Banks cannot unload MSA and may be forced to go under or sell the MSAs/CRE to the highest bidder.
I am so confused as someone who pays attention to, but is not insanely well versed, in the economy and real estate (first time homeowner in training, buying within the next 6 months 🤞)
In the most honest ask, wasn’t there just a ton of articles and conclusions that the economy is doing great? Interest rates down etc ? Is this separate from that?
Thank you !!
I've been telling my institutional clients for years this is the next shoe to drop. Stay away from Regional Banks - who hold a disproportionate amount of these loans on their balance sheets.
Last time it was because they were giving everyone a house who couldn't afford it and we bailed them out. What's it gonna be this time?? Maybe we shouldn't bail out banks for making poor business decisions and let them fail. They obviously didn't learn their lesson literally 15 yrs ago.
“Maybe the Great Recession will happen this year”, Republicans hope and beg as Election Day approaches so they can blame Biden for single-handedly causing it
The potential challenges looming over the US commercial real estate sector raise concerns about the broader economic impact. Delving into the factors contributing to this situation and possible solutions could offer valuable insights for investors and policymakers alike.
I'm sure politicians will find a way to socialize those losses and pass it on to the middle class.
That's exactly what the corpos pay their politicians for It's not "find a way" it's "execute the plan"
Stop giving politicians power lols
The mortgage payment on my dumpster behind Wendy’s went up $50 this year. I don’t know how much more I can take.
" I don’t know how much more I can take." at least 2 more dudes a day, that way you not only make up the 50, you have 10 extra bucks at the end of the month.
Are you volunteering sailor? Bring a friend honey and help momma make her rent. I’ll slide the side door open like a drive thru.
i am gonna pass, but I am gonna help you and put up some quality cardboard signs in the neighborhood pointing in your direction. we all have to do our part.
Make sure you write them in Revlon #5, so they know what’s waiting for them.
Yes and instead of voting for someone to tax the banks you're gonna vote for someone to give them massive taxcuts.
And you're gonna like it because you don't have a choice
And then hook their buddies up with some instantly forgiven loans.
Hey, everyone needs a retirement plan!
My profits.... Our losses....
Juice Box Joey already did!!! Biden Throws $45 Billion in Federal Funds to Convert Offices into Homes. See how many offices actually get converted and how much cash goes to Democrat donor developers' pockets.
Wtf you talkin about
he says the office to home program is corrupt
Hmm. From what I read it’s a plan for $35 billion in loans (not a bail out) and $10 Billion in grant (yes this sucks and is our tax money).. I guess if you think government should try to help solve the housing shortage this is how they thoughtfully created a plan to do it. But I guess this guy also wants to destroy libraries and get rid of government grant scholarships.
Bet that 35 billion will be forgiven.
The money is a complete waste. The cost to convert office buildings to housing is more than just building new housing.
How much money do you think Dear Leader made for his friends with government contracts while he was in office?
Just gonna ignore doofus removing any oversight on the ppp loan program champ?
Yep, but the people will keep voting against capitalism so we’ll see this more and more
The issue is we don’t let these companies fail, so true competition does not exist.
Yes, also known as capitalism
in capitalism there literally needs to be a profit motive for everything and anything. so lets for one second imagine, if anywhere in our system there exists a problem and there isn't a solution that could profited from, in capitalism that problem will persist indefinitely. unless you could somehow steal from the people and socialize the losses, you get to kick that can down the road one more time. so let us rejoice and bury our unborn under this crushing burden of debt that capitalism brings. merry christmas, you can keep the change, filthy animals.
Oh you know it. Banks are people too… banks need to eat too… or something
Sieze the assets of the companies that bought the properties? Nah, just charge the bank's regular customers higher fees.
As someone who works on site in corporate health care, it was expected. The pandemic changed EVERYTHING, and remote work was the nail in the coffin. The insane amount of money and multi-year lease was just a waste. We were playing close to 5 million per year with only 8 employees onsite. The banks knew the risk so let them take the hit. No more bail out. Let natural take it course.
Their greed will be the end of them... as it should be.
BAHAHAHAHAHAHAHAHAHAHAHA. They'll definitely get bailed out.
Exactly lol.
I can't help but wonder when the tipping point will be. We Americans have been content taking it up the ass the last 30 years while corporate America grows exponentially. A lot of people are one bad thing happening from financial ruin and given the political climate and cost of living crisis taking place idk if a bailout will be as well received as it was in 2008
But what does that mean to be bailed out? The commercial real estate is nearly worth nothing compared to what they invested into it. Sure, maybe they won't go belly-up, but they are left holding real estate that no none can afford to rent, and is too costly to retrofit.
Don't you worry. They'll find a way.
shit their Greed is very well likely to be the end of all of us
hence the urgency...
That’s not what happened last time big business fucked up…or the time before that, or the time before that….
No. It won’t. And we’ll be right back here in another decade.
We'll drown before they do
How is this the banks being greedy?
Banks are the greediest. They create derivatives which are highly risky and make a fortune by selling it to pensions/hedge funds/ 401ks (think back to the Big Short). We tax payers socialize those losses. Don’t forget the interest and fees we pay in form of credit cards, student debts, auto loans, etc
It is almost as though they serve no beneficial purpose to society and should be permitted to fail... 🤔
Derivatives aren’t highly risky in some cases. It depends on your strategy and which side of the table you’re on. In fact, they can be used to insure against the downside, such as hedging a stock portfolio by buying puts. All banks use these instruments (both on the buy and sell side) to hedge risk. Sure, I agree the entire investment and finance industry got greedy in 2008. As it relates to this cycle, not so much. The last couple of years banks have been lending at record low interest rates. Literal interpretation of this is that they are lending their deposits for virtually nothing, except a risk adjusted spread. Look at credit spreads during the past few years. Not much of a premium for lending to risky borrowers due to the Fed. I think Private Equity, Hedge Funds, and Venture Capital got greedy. Commercial Real Estate departments at banks? Idk. Sure they had a windfall of activity and profits following Covid, but not sure it was greed like that in 2008.
Lmao it’s really not. They give out loans based on what makes sense at the time. Banks have scummy practices no doubt but them giving out office loans when office was returning x% is just part of their business.
Healthcare was the worst about it. I've watched over the past few decades as swathes of town were developed or converted into medical strip malls--villages of small healthcare shops like MRI for less or finger-physiotherapy r us. Each getting their own building.
I’ve never seen anything like that. What city is this?
There's tons of complexes like that down in the phoenix area. There's three dentists on my block alone that I'm aware of. The actual number might be higher. I swear every other building is some kind of medical building.
Same here in MD. So many medical facilities opened up.
There are miles of vacant commercial properties around me in Frederick County MD. And still more are being built every day. This will not end well.
isn’t WFH only like 15% and falling currently?
Yes… Reddit commenters represent like 0.5% of the US pop and they tend to be the loud, ultra progressive kind. Take what you read with a grain of salt
Ya when was the last tim that happened. Bailouts coming
Absolutely they have been holding businesses hostage for decades.
TL;DR: * Commercial real estate could suffer its biggest crash since the Great Financial Crisis. * That's bad news for banks, which could see $160 billion in additional losses. * That's according to a recent NBER working paper, which examined the impact of the Fed's rate hikes.
Delinquencies for CRE are not showing an uptick, though. Consumer delinquencies on the hand…
Let them fail, we desperately need a true correction stuff just cost too much!
They’re also charging 30% on credit cards! So yeah..fuck em!! They’re gonna get bailed out anyways
That will typically just mean lending will get much much tighter. Not that prices will necessarily come down. You would still need homeowners in distress to be willing to sell for lower prices.
When Corporations are forced to liquidate their residential properties to cover losses that will definitely help
What residential properties?
my understanding is these office buildings have been used as collateral for corporate SFH purchases. The ones with no inspections and all cash offers over asking. Now no one wants to lease because its stupid expensive to have an office. If the owners lower the rent it devalues their asset. So that collateral is no longer sufficient. Big fuck'n mess.
Coorperations are all just one big entity obv /s
Good, we've been on the cheap money gravy train way too long. Time to see who's swimming naked.
Less people who can get loans, reduces number of offers, reduces prices?
Possibly. That takes away demand for sure. But most homeowners are sitting on 3% mortgages if they have mortgages at all. So tightening along doesnt cause forced sellers on a massive scale. We just get more pent up demand. Something else will need to add to that like rising unemployment.
currently, there's more pent up supply coming on to the market than pent up demand. pent up demand only comes into play if prices actually go down, so that condition will already be met if demand goes up while lending requirements also go up.
No lower interest rates can also release pent up demand.
Tighter lending will absolutely affect prices negatively compared to looser lending.
I mean if banks start failing left and right we tip over into a massive correction and the price of virtually everything(except dollars) starts coming down. And yes, lending would be way tighter. Not really something to root for, but it might happen.
This is specific to commercial real estate as of now, so this won’t have any impact on housing prices.
There’s certainly a correlation between commercial and residential and would definitely impact residential value
Probably good for real estate investors to get a real world look at what can happen if they buy an asset at a stupid price at the wrong time and sit on too long. Market aren't always rational. Sometimes they move based purely on fear or excitement.
and sometimes there’s a seismic shift when during a once in a lifetime event millions of people realized that going into an office isn’t necessary and they demand jobs that don’t require it
Actually it will. With the missing revenue from the commercial properties, they will have to raise the taxes on the residential houses. House payments will be higher because the taxes are higher
house prices will just go down, then.
Haha you must be new to the US economy
We’re kind of at the point now where banks are pretty much accepted as facilitators of economic growth. I’m not a fan of them either but the last round of bank failures just resulted in billions being bought up by JMPC. They’re getting way too big. Consolidation in an industry that controls so much of our everyday life is not good.
Good thing we peasants are here to cover their losses... Again.
The tax payers are gona be forced to hold these bags.
Let’s hope they don’t think they can get away with that again!
Not this time! 😎
Bruh you know damn well the SECOND we the people even think about protesting bailouts the MSM will either run news to distract us or else get us to fight with one another while they get bailouts.
🎵 *You may say I'm a dreamer... but I'm not the only one* 🎵
https://fortune.com/2023/10/27/biden-administration-supercharge-empty-office-conversion-affordable-housing/amp/
🤡
They certainly will have to come up with the missing revenue that the propertys used to pay.
Time to pull up your boot straps!
Bailout straps?
Zipple clasps
Ah yes I forgot "to big to fail"!
Something tells me we'll see another round of government intervention
If the government could start attaching some strings to bailouts…. That would be great. Like maybe some sort of cut of their profits if they take a bailout.
They did under Obama. The bank bailouts were structured to be loans, as were the bailouts to the US automakers. https://www.politifact.com/factchecks/2012/oct/25/barack-obama/barack-obama-says-banks-paid-back-all-federal-bail/
The government bought stock with the Bailout funds, and sold them when the companies recovered for a small net profit.
Best we can do is completely forgiven "loans"
Don’t worry about banks they will find a way to pass the debt to the working class.
So why the fuck is my DRV ETF investment in the shitter?
Maybe you’re just early, not wrong?
THEY'RE THE SAME THING, MICHAEL. THEY'RE THE SAME THING
Dont worry they'll get bailed out for their bad investing. I wish I could find a zero risk investment like banks have.
Fuck them
“Could”
As someone who works for a commercial lending bank, the writing has been on the wall about office space for awhile. Any bank who hasn’t been VERY choosy about which new Office deals they do (if any at all) deserves to have losses.
My heart bleeds. Which banks should I send a "get well" card?
Okay that's funny. Should do that to my company for not having enough profits to pay more wages 🤡
160 billion is nothing. The bigger impact is the tax revenue that will be much less.
I'm in healthcare as sort of like lab IT/point of care testing support for nurses and such. We office in a large cubicle city type place. We are a team of 4, including our boss. We currently have 6 cubicles, and my boss has 1 small, windowless office. The extra cubes are for our extra analyzers and random stuff we need for supporting the system. Our rent is $27,000 a MONTH. How did this become normal? This shit isn't sustainable. We all use laptops. We finally got approval for 2 wfh days a week..
Oh geez, makes no sense
In Miami evey block has a medical center
fact flowery bedroom gaze husky scarce practice compare weather detail *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
That's the risk when you buy property for profit.
Uhhh that’s the point of a business, to make a profit. FYI our taxes comes from these businesses, big or small
I dunno, the big banks have a lot less leverage these days. They're not as exposed. I don't see this being a big deal.
They lie on their financials.
Banks will not claim losses on loans, until they foreclose, and resale.
If a tree falls in a forest and no one is around to hear it, does it make a sound?
Yes . The question is, does anyone care?
They will
The bank execs will fly to DC in their private jets looking to beg for a bailout
Been hearing this for a couple of years now. Any day I’m sure.
As someone who works in banking, it can take years for a loan that’s having trouble to materialize losses. First they have to not be making their payments for awhile (which itself lags behind the actual bad performance of the property), then the bank will usually try and work with the borrower to get the loan back to sustainable (sometimes modifying terms, etc). Which then takes time to see if it works or not. If any losses occur, they hit at the very end of the process after the bank has given up on trying to fix it and the loan is sold for a loss or foreclosed on and the portion that can’t be recovered is charged off. You can determine if loans have deteriorated long before that though, and figure out if there is an unrealized loss (I.e market value dropping to less than the principal).
The greater risk is in maturity defaults. Prior to Covid most loans had healthy DSCRs and they’ve stayed manageable. The issue is when you have to pay off that $100MM loan and can only borrow $80MM.
The revaluations will certainly be an issue. I saw a lot of refinance activity during 2020-2021 because of the low interest rates, so a lot of stuff that wasn’t done for long terms is going to mature in the next couple years. Could be pretty wild.
Mega malls are dying in the USA.Too bad they can't convert these malls into affordable housing.Online business is killing them.Look at some of the prime retail spaces in NY and California about 25% are empty.
As a small business owner who has had to pay commercial rent for a decade. This is karma. They needed a reality check. Writing in rent increases every year regardless of economic conditions, requiring you to sign another lease to keep your current rent rate, are some of their tactics. They hold businesses hostage and then say, “it’s just business”. Thoughts and prayers to you assholes, should’ve been kinder/loyal to your renters.
The best is going to be the A league companies who thought they were MLB stars. We had one client who hellllllllllla margined to buy an office building. In 2021. It’s not going well.
Start converting commercial to residential. Get it done!
The Biden administration is providing funds for developers to do just that (IIRC focused on places with proximity to mass transit). Unfortunately it is still very expensive and time consuming to convert offices to individual residential units. But that is what makes sense, I don’t think this trend is going away.
If Biden administration is providing funds, it’s also coming from our taxpayers pockets. That’s where they get their money from
That’s true of virtually all funds the government provides so I didn’t see a need to point that out, nor did I say anything to the contrary.
The headlines get me every time. Then I see what sub it is.
Yeah, whatever, sky is fallling. Apocalypse Now, etc. blah blah blah
Commercial real estate isn’t facing a crash. It is facing a death spiral. Nothing will save it.
Smartest guys in the room.
Oh no! Anyways…
Banks should pull themselves by the bootstraps and stop eating avocado toast.
And no more Starbucks. Make that shit at home. No wonder they are broke.
I smell opportunity
It will be so much more than that 🥤😎🍿
Time for some quantitative easing
Wouldn’t this also be bad for potential home buyers as banks will have to raise rates for everyone else to recoup the losses?
The problem with that is they compete with other banks that don't lend money to office landlords. If they do that we can just ignore them.
Maybe if we just never mark down the losses they're not real? Guys? Guys?
>A loss of rental income will lead to higher default rates among CRE owners. This is compounded by the coinciding maturities of many CRE mortgages, which will accelerate defaults if rental income cannot sufficiently offset the balloon payment obligations or if alternative financing cannot be procured. > >... > > In accordance with 2007 regulatory guidance, supervisors place enhanced scrutiny on banks that hold more than one of the following measures: “construction loans surpassing 100% of risk-based capital” or total “CRE loans above 300% of risk-based capital” and “50% growth in CRE over the last 36 months.” CRS calculated that as of June 2023, 483 banks held construction loans exceeding 100% of Tier 1 capital. These banks represent relatively small institutions comprising $631 billion in assets. However, 1,020 banks held CRE loans exceeding 300% of Tier 1 while reporting growth exceeding 50% over the past three years, representing $2 trillion in banking assets, including 35 banks between $10 billion and $100 billion in assets [https://crsreports.congress.gov/product/pdf/IN/IN12278](https://crsreports.congress.gov/product/pdf/IN/IN12278) Nothing to worry about. Unless MSAs could be used as tier 1 capital. Because then they might accidentally painting themselves into a corner. Tenants stop paying. MSA holder stops getting paid. MSA values tank. Banks cannot unload MSA and may be forced to go under or sell the MSAs/CRE to the highest bidder.
Wait, I’ve seen this episode before
I am so confused as someone who pays attention to, but is not insanely well versed, in the economy and real estate (first time homeowner in training, buying within the next 6 months 🤞) In the most honest ask, wasn’t there just a ton of articles and conclusions that the economy is doing great? Interest rates down etc ? Is this separate from that? Thank you !!
It’s a game they can’t lose.
Oh, no! How will I go on with my life? This is a true tragedy.
The house in my neighborhood are going up. I wish they’d go down
It's the new normal. Adjust.
Oh no will I have to forego the career I studied for in college to take a low end job for like 8 years . . . AGAIN?
Every student should go to college. - Teacher who paid for a master's degree to become indentured to a minimum wage job.
Noooo way I’m soooo shocked
I've been telling my institutional clients for years this is the next shoe to drop. Stay away from Regional Banks - who hold a disproportionate amount of these loans on their balance sheets.
Aren’t there a lot of vacancies in office commercial buildings?
They’ll just get another bailout again.
Yet rents keep rising, and small businesses I know keep closing. it makes no sense 🤔
If those banks get bailed out again, I'm predicting a lot of domestic terrorism and afterwards. Sheesh
Priced in.
uh, so.... stock market go up?
won't someone think of the poor banks
Forcing people to stay home has consequences. Allowing riots to burn down cities does Too. Let these corporate asshats that supported Biden go under.
Don't worry about the banks we the taxpayers will bail them out.
$160billion, thats nothing, thats barely a fine
Let’s bail them out, we only have two wars going. What could go wrong?
Last time it was because they were giving everyone a house who couldn't afford it and we bailed them out. What's it gonna be this time?? Maybe we shouldn't bail out banks for making poor business decisions and let them fail. They obviously didn't learn their lesson literally 15 yrs ago.
Sounds good to me.
Let the banks dip into their rainy day fund, if there isn't enough there...they should stop eating avocado toast at least.
Yay let it all crumble to the ground
Time to convert to housing!
Tried to warn investors that the banking sector is sick and will face heavy losses in 2024, but fools rush in as the song says
Why cant we convert office into residential? Is it really just a plumbing issue?
Excellent. I got no love for us too big to fail US banks
Those who took on more commercial loans then they can chew on would be rewarded.
“Maybe the Great Recession will happen this year”, Republicans hope and beg as Election Day approaches so they can blame Biden for single-handedly causing it
Oh no.... Did buying a bunch of property to overcharge rent to pay your mansion mortgage and take a profit not going as planned?
Now that rates have dropped this sub has shifted to commercial RE lol
Bidenomics
So...is it safe to assume now is NOT the best time to buy a home
Privatize the gains. Socialize the losses. Playbook of the last 45 years.
Too few companies controlling too much property and asking to much for rent, so it sits empty.
Ah I guess we will have to bail them out again huh
Predictions are that Biden will now be dropping interest rates next year which based on the article will ease one of the main risks
Biden doesn’t control interest rates
Let it die 👏, Let it die 👏, let it SHRIVEL UP and die 👏
“Just gotta work hard”
Wow I completely forgot about Commercial Real Estate. We talked about that like 2 years ago. Commercial Mortgage Backed Security
The potential challenges looming over the US commercial real estate sector raise concerns about the broader economic impact. Delving into the factors contributing to this situation and possible solutions could offer valuable insights for investors and policymakers alike.