Debt Bomb Coming Soon

[Life Hawk]

With the Enormous credit card and regular debt out there tough times ahead .

I have to agree with you on this one. Look how a the Ukrainian war has effected our own debt. Another conflict like this will heap strain upon an already maxed out situation in this country.

Hmmm... defeating your enemy through economic means. Not a new strategy.

 

[BillBateman]

I was listening to Patrick Bet-David on a podcast this weekend talk about a commercial high rise he's negotiating to buy that was $89 million 2 years ago and current asking price is $49 million and projected to go lower. We have a glut of partially occupied commercial property. The crash will be ugly.

 

[somarco]

Competing viewpoints

https://www.cnbc.com/2023/04/09/the-coming-commercial-real-estate-crash-that-may-never-happen.html

[EXTERNAL LINK] - Council Post: Bracing For A Possible Commercial Real Estate Crash

[EXTERNAL LINK] - Commercial real estate market could crash soon. Here's why

 

[DonP]

Competing viewpoints

https://www.cnbc.com/2023/04/09/the-coming-commercial-real-estate-crash-that-may-never-happen.html

[EXTERNAL LINK] - Council Post: Bracing For A Possible Commercial Real Estate Crash

[EXTERNAL LINK] - Commercial real estate market could crash soon. Here's why

Ive been in the mkt over 35 yrs . Doom and gloom that Somarco loves to spew rarely comes true . I remember in 2010 all they talked about was in 2012 $3 trillion of real estate loans coming due and it was going to crash . The last 15 months recession coming , recession coming . Where is it ? In 2020 the world was ending with Covid . Now the excitement of Ai here to save the day

 

[scagnt83]

Competing viewpoints

https://www.cnbc.com/2023/04/09/the-coming-commercial-real-estate-crash-that-may-never-happen.html

[EXTERNAL LINK] - Council Post: Bracing For A Possible Commercial Real Estate Crash

[EXTERNAL LINK] - Commercial real estate market could crash soon. Here's why

I would be more worried about residential real estate. Many commercial units can be turned into residential units.... and already are at record rates.

With lending standards getting tightened up more each day. And interest rates increasing more as the year goes on. It pushes buyers out of the market.

Combine the lack of qualified buyers with a flood of new residential units from the commercial conversions..... plus the 5/10y ARMs are hitting higher rates now.... it could be 2009 all over again for housing prices. 20% would not surprise me at all... but 40% is not unlikely imo.

 

[PrivClientSG]

I've more often than not found that both the heretics and the cool-cats play to their part -- the former overreact and the latter don't react at all. LOL. I don't argue about real estate, prices, markets, etc. Waste of time. Do I see something to be concerned about? Potentially, yes. Without question? Maybe. I think it will take time -- far more time than most expect -- to determine the extent of the companies that will be looking to give up, get out, etc., of their office space. Of course I've seen it start already throughout the pandemic.

Personally, I am investing in a few PE deals that are doing "conversions," I am a substantial investor in real estate, so I view this not only as a hedge, but as further diversification in an already existing asset class. In the real estate asset class, I am also invested as a "lender" as one of my long-term investments (with a real estate company/firm that does lending/financing/etc). The deals I am going in are not contingent upon "sale" or "liquidity event" or "exit strategy" as the manager (nor I) doesn't mind owning the real estate long term. At my age, I already have my "principal" allocated, so I like this for income if we end up owning the real estate long term. None of my investments are investments in the debacle, a crash, or anything of the like.

Professionally, I think that like we've always seen -- this will hurt banks and more mainstream lenders more than it will the insurance companies. Yes, the insurance companies are more mainstream lenders in the major office space, high end, big ticket office building marketplace, but if there are non-performing loans that go into default, it is not going to be some massive, catastrophic, market crashing, black swan crisis. Remember, when interest rates were at all-time lows, insurance companies were not exclusively looking at commercial mortgages as their only revenue generating lending line of business. Regardless, could it be a major correction? Could we see capitulation? Could we see major defaults? Yes, but I think the extent of that will be "right-side" of the decimal point. I don't see one insurance company having their ten biggest loans go to zero. I can see one or two, and see a default/sale and yes, that could take time -- but even the default would be "right-side" type of numbers. Then there's a sale. Pennies on the dollar? Dimes? Quarter or half-dollar? Remember, even the insurance companies "hedge" their risks. Other than the heretics, the smart people have to look at the norms, not the exceptions.

 

[PrivClientSG]

Not that it means anything...

[EXTERNAL LINK] - Life Insurers' Commercial Mortgages Did Something Strange in Q1 | ThinkAdvisor

 

[walthamny]

These predictions sound like what liberals said about ozone layer 30 years ago or in 1978 we were predicted to be out of oil in 30 years. I forgot about the peak oil guy. Oil was supposed to hit 300 a barrel 10 years ago. Markets adjust very efficiently in the long run, while being inefficient in the short run occasionally

 

[somarco]

Residential rents are rising as well, especially in larger cities. "Affordable" housing is difficult to find for middle income folks.

Locally, residential landlords are hurting. Raising rents to make up for tenants skipping out and breaking leases is a conundrum. They can't afford to lower rents and increasing them puts pressure on current tenants to flee.

 

[WinoBlues]

I was listening to Patrick Bet-David on a podcast this weekend talk about a commercial high rise he's negotiating to buy that was $89 million 2 years ago and current asking price is $49 million and projected to go lower. We have a glut of partially occupied commercial property. The crash will be ugly.

May be regional, However, San Francisco is dealing with this now.
Companies evaporating, Fleeing high cost SF, fleeing CA, remote workers, crime and homeless.