The next real estate crash

The upcoming crisis in commercial real estate will probably be more traumatic than the residential crisis has been. It will be at least as big in terms of dollar cost—more, probably, because businesses have no notion that they are morally obligated to repay a loan if defaulting produces a better economic result for them.

Two other factors are new ones. First, this is commercial activity that is collapsing, exactly the sector we look to to provide the jobs that would pay us the money we need to dig ourselves out of our own financial pits. And second, we are a year into dire straits—the savings are depleted, the unemployment benefits have been extended further than ever before, cities and states are nearing the edge of the abyss—how many more body blows can the economy sustain before it is forced to give up on the hope of an eventual return of the status quo?

Here’s a good summary of the upcoming problems with commercial real estate loans.

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One thought on “The next real estate crash

  1. “how many more body blows can the economy sustain before it is forced to give up on the hope of an eventual return of the status quo?”

    Good question. Judging from my conversations with friends and co-workers, most are still hopeful for such a return. I tell them we’re still in the beginning stages of a large collapse, a return to genuine economic prosperity is a vain hope, and they would be better off putting there hope elsewhere.

    They tell me I’m too negative. :-)

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