Economy
Hopefully, the 2008 mortgage crisis won’t be repeated, but there are reasons to worry.
This time the concern is not so much about residential properties, but about the growing amount of empty commercial properties.
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Investors ‘once again brace for turbulence among regional lenders’
New York Community Bank, to give just one example, suffered its third credit downgrade in just a week.
Commercial real estate is being hit with a triple-edged sword.
First, high interest rates make already expensive units much more expensive. Second, and perhaps worse, too many office buildings and commercial buildings are sitting empty, thanks to remote working. And remote work is also on the rise in places like Oakland because it’s simply too dangerous to commute to work.
Yahoo Finance reports: “Nearly a year after the failure of three mid-sized U.S. banks sparked an industry crisis, investors and regulators are once again bracing for turmoil among regional lenders, this time due to the ‘increase in defaults on commercial mortgages’.
The story continues:
NYCB was initially a benefactor of these failures, taking over Signature Bank last year after it was shut down by regulators following a run on deposits.
The culprit now is commercial real estate debt, which is worsening rapidly as landlords face interest rates higher than they can afford and tenants, after nearly four years of half-full offices, are cutting their leases. lease.
And while the U.S. banking system is increasingly dominated by a handful of national giants, commercial mortgages are still the purview of regional lenders.”
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What’s next?
“Commercial mortgages represent, on average, 3% of the assets of the 10 largest banks in the country. In the next 150 banks the percentage is almost 20%. Local banks typically keep half of their customers’ deposits tied up in mortgages for office buildings, hotels and shopping centers,” Yahoo notes.
No one knows how this will play out, but analysts are right to be concerned. It wasn’t long ago that California’s regional banks completely collapsed, sparking similar concerns.
As if inflation wasn’t bad enough, is there also another mortgage crisis on the horizon?
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