The worst is yet to come
Commentary:
What to expect from the commercial real estate crisisBy Josh Lipton
NEW YORK (
MarketWatch) -- Over the next few years, a wave of commercial real estate loan failures could threaten America's already-weakened financial system.
So warns a new report from the Congressional Oversight Panel as part of its oversight of the Troubled Asset Relief Program, highlighting yet one more hurdle for this country's fragile economy.
The panel, chaired by Harvard law professor Elizabeth Warren, says it remains "deeply concerned" that commercial loan losses could jeopardize the stability of many banks, particularly the nation's mid-size and smaller banks.
Worries about CRE loans -- those loans taken out by developers to purchase and maintain shopping malls, offices, hotels, and apartments -- have been simmering for months, as we noted in an October article.
See "How Banks Will Fare in a Commercial Real Estate Crash." The problems now plaguing commercial real estate have no single cause, and the panel notes that the loans most likely to fail were made at the height of the real estate bubble when commercial real estate values had been driven above sustainable levels and loans.
"Many were made carelessly in a rush for profit," the panel said. ..........(more)
The complete piece is at:
http://www.marketwatch.com/story/more-gloom-ahead-in-commercial-real-estate-2010-02-17?link=kiosk