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Could the mortgage on the building that once housed your local Circuit City be Ground Zero for the next financial crisis? A new report by Elizabeth Warren's Congressional Oversight Panel, which is in charge of monitoring the bank bailouts, says "maybe."
Warren's panel warns that a rapidly approaching "wave" of loan losses on commercial real estate (CRE) "could jeopardize the stability of many banks." That's because $1.4 trillion in CRE loans need to be refinanced between 2011 and 2014, and according to the panel "nearly half" of them are "underwater"—that is, the mortgage-holders owe more than the underlying property is worth. If the owners can't refinance, they'll probably default. That's bad:
When commercial properties fail, it creates a downward spiral of economic contraction: job losses; deteriorating store fronts, office buildings and apartments; and the failure of the banks serving those communities.
Real estate industry experts expect financial and real estate markets in the United States to bottom in 2009 and then flounder for much of 2010, with ongoing drops in property values, more foreclosures and delinquencies, and a limping economy that will continue to crimp property cash flows, according to the Emerging Trends in Real Estate[R] 2009 report, released last week by the Urban Land Institute (ULI) and PricewaterhouseCoopers LLP.
"Commercial real estate faces its worst year since the wrenching 19911992 industry' depression," conclude industry experts interviewed for the report, which projects losses of 15 percent to 20 percent in real estate values from the mid-2007 peak. "Only when property financing gets restructured will pricing recorrect so we can find the floor; and this transition could wipe out companies and people," says one respondent interviewed for the report.
Now in its 30th year, Emerging Trends is the oldest, most highly regarded annual industry outlook for the real estate and land use industry and includes interviews and survey responses from more than 600 leading real estate experts, including investors, developers, property company representatives, lenders, brokers and consultants.
Originally posted by iMacFanatic
Revolution is coming to this country and I expect it before I die.
BUT it won't be what the hard right or the tea party is rooting for...no it will be a French or Russian revolution style uprising they will tear down the entire old order.
It will get bloody.