Commercial Real Estate Downturn Creates New Call For Bailouts
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The floodgates are open and every businessman and woman who has made a bad business decision is now clamoring for a federal bailout. The commercial real estate industry, you remember the one that saw property values increase by double digits for a number of years, is now saying a 15 – 20 percent downturn is going to wreck the economy.
The prospect bodes ill for banks, along with pension funds, insurance companies, hedge funds and others holding the loans or pieces of them that were packaged and sold as securities.
Jeffrey DeBoer, chief executive of the Real Estate Roundtable, a lobbying group in Washington, is asking for government assistance for his industry and warns of the potential impact of defaults. “Each one by itself is not significant,” he said, “but the cumulative effect will put tremendous stress on the financial sector.” via NYTimes.com.
Seriously, any downturn hurts, but when prices soar to levels that can not make leasing profitable for the landlords, then there is a whole lot of stupidity going on. But the extra profit that these folks made on over-leveraging is yesterdays news when it comes to the chance to cry poverty and get a bailout from the Federal government.
What ever happened to the mantra, sock away a little extra for a rainy day?
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Comment by John on 6 January 2009:
I work in real estate and I must say that this is some troubling information, however, I am confident that the market will recover within the next year. There are several real estate companies out there that are finding new ways to reach people. For example, this company called Taylor Morrison has a really good contest people can enter where they can win a dream vacation, here’s a link if anyone is interested, http://snurl.com/9ht46.
Comment by Alicia Hughes on 8 January 2009:
The fund companies that made bad, sometimes immoral or greedy decisions, in part causing this downturn, asking for government assistance is ridiculous.