One of the questions I am hearing more of is “Who will refinance the commercial real estate debt?” This is not an idle question, as opposed to the residential real estate market, refinancing or rolling over debt is a big part of the commercial real estate business.
And with the falling values and lenders on the brink there is no easy answer to the question. The market is so huge that the costs to the economy and the industry are tremendous.
If we do not have the confidence to refinance these loans the results could be devastating to the industry at large and also to the banking community.
“There is a lack of new debt,” says Michael Haas, a real estate attorney at Jones Day. “There is a hesitancy to extend credit when there is a real possibility that the real estate may be worth less than it was a few years ago.”
Now, in a situation eerily similar to the subprime crisis, the result is likely to be a wave of foreclosures and loan defaults that could, in turn, trigger a collapse in the market of the structured bonds backed by commercial real estate and construction debt. But when, and how bad will it be? Here are three indicators to watch. via Investor Daily
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{ 3 comments… read them below or add one }
It was unsustainable to begin with, so unfortunately most of these are going to have to tank. Its a bubble that we cant prevent right now.
-Tyler
If you think these banks are hurting taking in so many residential properties and eating $100, 200, 400K mortgages, just wait until the commercial bubble blows out (and it will…..) and they begin eating $1M, 2M, 4M, etc mortgages!
there will always be hesitations for now. since economy is down