Next year the credit markets will seize up again as banks and investors get hit the the next wave of residential foreclosures and the implosion of the commercial real estate credit market.-Lou
Lack of Bank Liquidity Threatens Commercial Real Estate Market
According to Remington Financial Group, a capital services company based in Scottsdale, Arizona, a lack of bank liquidity poses a severe threat to the commercial real estate market.
“The commercial real estate industry is a disaster waiting to happen,” said Andy Bogdanoff, founder and chairman of the company. “With U.S. banks in a deep and continuing liquidity crisis and with $1.2 trillion in commercial debt due to mature by 2012, thousands of real estate owners and developers across the country will soon find themselves between a rock and a hard place when their loans mature.”
However, bank liquidity isn’t the only threat to commercial real estate. Bogdanoff said it is estimated that two-thirds of the securitized loans and half of the whole loans due to mature between 2010 and 2013 would not quality for refinancing due to today’s more stringent banking standards. He said the problem is further compounded by the combination of the unprecedented high cost of funds and the 40 percent decline in real estate values since 2007.
“With property values less than the original debt, thousands of owners and developers may have no choice but to sell their properties at a loss or face bankruptcy when their loans mature,” Bogdanoff said. “If the problem isn’t solved soon, the result could be a disaster for the commercial real estate industry and the U.S. economy as a whole.”
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